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:
2. Equity Plans – Stock Options and Restricted Stock
3. Stock Option Plans
4. Restricted Stock Plans
5. Company Buy-Back and Repurchase of Stock Options and Restricted Stock
6. Cash Plans, Phantom Stock Plans and Stock Appreciation Rights
7. Summary and Plan of Action ◄You are here
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
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.
Think about the number of key employees that you have and that you’ll need over the next 5 years.
Talk to your employees, and find out what they want. Cash or equity?
If they want cash, use a cash plan or phantom stock / stock appreciation rights plan.
If they want equity, then:
*** 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.
*** 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.
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.
Go to a park, sit on a bench, and enjoy the afternoon.