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Stock Option Plans, Restricted Stock, Phantom Stock and
Other Incentive Plans
for Closely Held Businesses
Article #7 – Summary and Plan of Action for Stock Option
Plans, Restricted Stock, Cash Plans and Phantom Stock Plans
This series of
articles explains how restricted stock, stock options, cash
plans and phantom stock really work for closely held
companies, and what their real value is for the company and
the employee.
The articles
in the series are:
Where You Are in the Series
This is article #7
of a 7 article series. In this article #7, I give you 7
steps to implement your stock option plan, restricted stock
plan, cash plan, phantom stock plan or stock appreciation
rights.
To review, there
are two types of incentive plans: equity plans and cash
plans. I discussed equity plans, that is, stock option
plans and restricted stock, in prior articles #2-5. I
discussed cash plans, phantom stock plans and stock
appreciation rights in article #6.
Steps to Take in Implementing your Plan
Step #1:
Think hard about your company as it exists today, and as you
want it (and can realistically expect it) to be 5 years from
now.
Step #2:
Think about the number of key employees that you have and
that you’ll need over the next 5 years.
Step #3:
Talk to your employees, and find out what they want. Cash
or equity?
Step #4:
If they want cash, use a cash plan or phantom stock / stock
appreciation rights plan.
Step #5:
If they want equity, then:
o If
the number of key employees is small, use restricted stock
for that handful of employees, and use discretionary bonuses
or maybe a cash plan for everyone else.
o If
the number of key employees is larger, use a stock option
plan. Again, you can use discretionary bonuses or maybe a
cash plan for rank and file.
Step #6:
Call me or some other lawyer, because it isn’t that easy.
What I’ve talked about in this series of articles is just
the tip of the iceberg.
Step #7:
Go to a park, sit on a bench, and enjoy the afternoon.
Call me to schedule a legal consultation:
510-796-9144 | 