Stock Option Plans

Many owners and entrepreneurs choose to give their employees the opportunity to acquire equity in the company.  Stock options are an important feature of compensation plans for companies in all stages of development, from early stage efforts to attract highly qualified personnel who can get higher salaries elsewhere, to the liquidity stage, where huge efforts are required from employees in order to achieve a successful sale or other liquidity event for the business.

We prepare our stock option plans to comply with the complex legal requirements that apply in order to maximize the value of options issuances to both the company and the employees.  Incentive Stock Options, or “ISOs”, allow employees to receive options that they can exercise without having to pay a tax at that time

In addition to stock option plans, we prepare alternative incentive plans that give employees a stake in the growth in value of the company, without the issuance of equity interests.  Variously referred to as “Phantom Stock Plans” or “Stock Appreciation Rights,” these plans often mimic options plans in that the value of the rights granted increase in proportion to increases in stock value.  We also prepare management incentive and “carveout plans” plans directed specifically at the liquidity event context, so that management is incented to undertake the huge efforst required to achieve a company sale or IPO.

How many options should you grant to an employee?  What does a vice president of sales typically get in terms of options?  With decades of experience, we are familiar with industry standards and remain current as these standards evolve.

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