Phantom stock plans pros and cons
Cons Companies that implement phantom stock plans can incur additional costs, particularly if any stock valuation overview needs to be completed by an outside accounting company. For employees, the company calls all the shots in a phantom equity deal, giving them little control or maneuverability if the share price goes south. Phantom stock plans are shadows that mimic their real equity counterparts; phantom stock and shadow stock are terms that often are used interchangeably. Although shares of real stock can be traded at will, phantom shares or units take on value only when key contingencies or vesting conditions are met. Advantages of Phantom Stock Plans. Employers and employees can benefit from the use of a phantom stock plan in several respects. The main advantages that these plans offer include: There is no investment requirement of any kind for employees. Share ownership for the employer is not diluted. Employee motivation and retention is fostered. Pros: A phantom stock plan is a simple and effective tool to accomplish the following objectives: Enhance the recruitment and retention of key executives, particularly those with highly desirable Align the interests of owners and key executives, encouraging executives to think more like 2) You create phantom equity that triggers in the case of an M&A event. Again CEO has no actual equity, but gets a bonus based on the price the company sells at. Interestingly, this is less toxic than stock options but can have the same structure. Say the company thinks it is worth between $1.5B (3x rev) and $150M (15x earnings).
28 Jan 2013 CFOs are likely to consider the tax-deductible benefits of ESOPs An employee stock ownership plan (ESOP) is one potential solution performance incentives ( stock option, bonus, phantom stock plans) can be structured.
Advantages of Phantom Stock Plans. Employers and employees can benefit from the use of a phantom stock plan in several respects. The main advantages that these plans offer include: There is no investment requirement of any kind for employees. Share ownership for the employer is not diluted. Employee motivation and retention is fostered. Pros: A phantom stock plan is a simple and effective tool to accomplish the following objectives: Enhance the recruitment and retention of key executives, particularly those with highly desirable Align the interests of owners and key executives, encouraging executives to think more like 2) You create phantom equity that triggers in the case of an M&A event. Again CEO has no actual equity, but gets a bonus based on the price the company sells at. Interestingly, this is less toxic than stock options but can have the same structure. Say the company thinks it is worth between $1.5B (3x rev) and $150M (15x earnings). A phantom stock plan is a contractual agreement wherein a company promises to make cash payments to employees upon the achievement of certain conditions. What’s the purpose? Just as with stock awards, the purpose of a phantom stock plan is to generate an ownership mentality and reward key employees for helping to grow the business value.
Phantom stock only works well when a startup is a startup in name only. It has to have enough traction in the market that you can point to a series of comparables or outsider market valuations as otherwise the valuation of the company is a point of negotiation, which can lead to an acrimonious situation.
Phantom stock & stock appreciation rights (SARs) are becoming increasingly popular forms of stock-based compensation for employees. Learn the pros & cons.
Phantom Stock Plan: A phantom stock plan is an employee benefit plan that gives selected employees (senior management) many of the benefits of stock ownership without actually giving them any
18 Dec 2017 Other types of equity compensation include phantom stock plans and performance shares. Phantom stock plans provide a cash bonus based
A phantom stock plan is an employee benefit plan that gives selected employees (senior management) many of the benefits of stock ownership without actually giving them any company stock. This is sometimes referred to as shadow stock. Rather than getting physical stock, the employee receives pretend stock.
22 Feb 2018 pros and cons of such techniques as restricted stock, phantom stock, under an Employee Stock Purchase Plan that qualifies for special tax 18 Dec 2017 Other types of equity compensation include phantom stock plans and performance shares. Phantom stock plans provide a cash bonus based
Explore our wiki and find the answers to your Phantom Stock questions. Tools. Decide whether Phantom Stock is a fit for your company. Build A Plan. For "do-it-yourselfers." Follow this guide to create your own plan. Case Studies & Articles. Read the latest discussions about our value sharing strategies. Phantom Stock Option Plan. A Phantom Stock Option Plan, also known as a Stock Appreciation Rights (SAR) plan, is a deferred cash bonus program that creates a similar result as a stock option plan.The sponsoring company determines a phantom stock price through an internal or external valuation of the company. Phantom stock is not real stock in the official sense. Its price can link to an actual share price, and the company may pay discretionary dividends on the shares; but phantom shares are not voting shares. Some of FMI’s Canadian clients call it “ghost stock,” while compensation professionals refer to it as synthetic equity or phantom stock units. The Phantom Stock is issued in accordance with and is subject to and conditioned upon all of the terms and conditions of this Phantom Stock Agreement and the Plan as amended from time to time; provided, however, that no future amendment or termination of the Plan shall, without your consent, alter or impair any of your rights or obligations