Many Companies Weigh Phantom Equity as a Rewards Strategy
March 08, 2013 --
Irvine, CA, March 08, 2013 --(PR.com)-- More and more private companies are turning to phantom stock as a long-term method for rewarding contributors, according to Tom Miller, President of The VisionLink Advisory Group, a compensation consulting firm headquartered in Irvine, CA. Closely-held business owners are seeing this value-sharing approach as an effective means of allowing key producers to participate in the company growth they help create without diluting equity value for existing shareholders.
“We get more calls than ever before on this topic,” Miller explains. “Business owners are anxious to create a focus on building future value among their key producers and move away from simply paying above market salaries to people they want to attract or retain. Phantom stock is really the ideal solution in those situations.”
Given the attention this topic is getting, VisionLink is broadcasting a free webinar on March 26, 2013 entitled, “Is My Company a Candidate for Phantom Stock?” (More information and registration for this event can be accessed at: http://www.vladvisors.com/business-growth-strategies/event-details.aspx?ID=111.)
According to Miller, many business owners like the idea of tying incentives to the future growth of the business. However, they are reluctant to dilute their equity by sharing actual stock. So, the phantom stock approach allows them to simulate participation in company ownership without giving real shares away. Employees benefit because: they don’t assume the liability of an owner; they have a deferral of income tax until they receive a distribution of their accrued value, and; they don’t have to find a buyer to turn their shares into cash under the plan. The VisionLink leader indicates, “It’s just an ideal way to create the long-term focus most business owners want and in a way that is ‘self-financing.’ No value is paid out unless and until it’s created.”
Miller went on to point out that there are ultimately about nine different types of plans a business can consider if it wants to provide a long-term incentive to those who help fuel the growth of the business. In addition to phantom equity, these can include various types of stock or stock option arrangements, profit pools, performance unit plans and strategic deferred compensation. However, phantom stock is turning out to be the plan of choice more and more.
"When I speak with business owners and CEOs, I try to assess what outcome they’re looking for, or the problem they are trying to solve, before advising them which approach might be best," Miller added. “We’re not saying phantom stock is for everyone, but more often than not it fills multiple objectives the company is trying to achieve. At the end of the day, the idea of a plan that rewards company growth appeals to private company leaders. They want employees to think like owners and a plan like phantom stock creates that kind of mindset.”
More information about phantom stock and other types of long-term value sharing arrangements can be accessed at http://www.phantomstockonline.com. VisionLink recently launched the website to help answer the many questions business leaders have about these types of plans.
The VisionLink Advisory Group
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