INCENTIVE COMPENSATION

1
INCENTIVE COMPENSATION

• William C. Brown

2
Objectives

• Align employee incentives with those of company
  and shareholders and thereby promote growth of
  sales, revenues, profits, company stock value,
  etc. Give employees a sense of ownership in
  business results.
• Provide golden handcuffs to attract and retain
  key employees.
• Serve as initial step in business transition plan.

3
Considerations in plan design

• Identification of appropriate compensation
  criteria
• Cash requirements company and employee
• Accounting treatment
• Tax impact to company
• Tax impact to employee
• Business structure
• Cost of implementation

4
Alternative structures

• Base compensation
• Bonuses and bonus plans/pools
• Deferred compensation
• Stock-based plans
• Stock bonus plans
• Restricted stock plans
• Incentive stock options
• Non-qualified stock options
• Employee stock purchases
• Stock appreciation rights
• Phantom stock
• Employee Stock Ownership Plans (ESOPs)

5

• Key to fully understand client short-term and
  long-term objectives, and to design a plan which
  best meets those objectives without adversely
  affecting the business.