Increasingly, talent-driven organizations use equity models as a key differentiator to win the war for top executives. Private companies, in particular, are crafting innovative equity models that combine a variety of tools, such as restricted stock, hybrid loans, profits interests, synthetic equity and zero cost transfers of equity. Often, these ownership plans make a material difference in a company’s ability to attract, retain, and reward co-owners, as well as key executives.
The best equity models satisfy one or more of the urgent concerns that we hear expressed by owners and boards:
Affordability: “Our success has driven up the price of ownership. Key executives can’t afford to buy in and we may lose our best people.”
Competency: “Our core markets and strategies are shifting fast, and we don’t have the right people in place. We need to realign our leadership.”
Succession: “Some of us are ready to retire, but our equity model is getting in the way of our exit strategies. Our succession plan is at risk.”
Left unanswered, challenges such as affordability, competency, and succession can trigger equity inflection points, a term coined by the late Andy Grove, former Chairman of Intel, to describe an urgent and significant change that must be addressed to ensure a company’s future.