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Executive Matters

Private Companies - The Incentive Challenge
Executive Matters

Executive MattersIssue 2 | December 2017

Date
13 December 2017

Stephen Diosi Partner

Jennifer Anderson Associate

Private companies need to attract, retain and motivate their senior executives; Stephen Diosi and Jennifer Anderson look in detail at the equity route for Executive Compensation Briefing.


Private Companies - The Incentive Challenge

Private companies need to attract, retain and motivate their senior executives; Stephen Diosi and Jennifer Anderson look in detail at the equity route for Executive Compensation Briefing.

It is standard practice for publicly listed companies to incentivise senior management by rewarding them with equity.

There is a market in which the equity can be traded and a share price by which value can be measured, giving executives clear sight on their overall compensation package and reward targets.

Private companies are at a disadvantage in this respect because there is a limited, if any, market in their shares and therefore they may not be able to offer executives a revolving share in value creation in quite the same way.

But of course attracting, retaining and motivating top talent are of great importance and private companies need to consider how best to achieve these aims, including through an equity incentive strategy.

This article considers the wider principles around developing an equity incentive scheme, considerations in respect of its design and the common structures that are available.