Yesterday, on July 10, 2017, CEOWorld magazine published an article I wrote on “Restricted Stock And Other Equity Options For Your Executive Compensation Package”
This article was designed for CEOs, C-suite executives and other senior executives who are negotiating stock, options, RSUs or other equity as part of their compensation package.
The article first discusses the key ways to assure value in your executive equity compensation package –
- What will be the strike price? Is there opportunity for considerable appreciation within the given time horizon.
- Did you receive enough equity to make this worth it? In the article, I give an example where the executive with a base salary of $400,000, has an equity award of $2 million vesting over 4 years, and then state that because the executive started with equity whose aggregate strike price was $2 million, 3x appreciation translated to an appreciation of $4 million. Had the aggregate strike price been $200,000, then even with 3x growth, the potential gain for 4 years would only have been $400,000.
- Type of equity and its tax treatment is important. There are many choices in how to structure equity. The executive in a high potential growth or turnaround situation should seek the structure for his or her equity that offers the best prospect for capital gains on the appreciation.