Long-Term Incentives: How Private Companies Can Compete with Public Companies

Abstract

For any company, be it public or private, to compete sucessfully for key emploee talent, it must be well awre ofthe total direct compensation market for executives-including all levels and combinations of base salery, bonus, and long-term incentives. As many companies prefer-and soem shareholders demand-a portion of executive comensation is drectly aligned with the interest of the shreholders. This results primarly in the sue of stock options, restricted stock, and otehr equity-based plans. But what should private companies do? As they have not stock to offer, how do they address long-term incentives? One way si by using phantom stock. Anoterh way is buy using perfoance units plans. Though both methods have theri pros and cons, they can help priavte companies sucessfully compete with pulicly traded ones without diluting the onership structure of the company.