This document summarizes an incentive plan seminar discussing compensation strategies for motivating employee performance. It addresses issues around incentive plan design and provides suggestions. Specific compensation strategies covered include bonus plans, which are suggested for rewarding short-term quantified performance, and employee stock ownership plans (ESOPs), which are posed as a way to reward long-term performance. Benchmark ranges for common ESOP grants based on role are also provided. The document aims to provide guidance on effectively structuring incentive plans to drive desired business results through employee actions and alignment of goals.
23. Bonus PlansWho, When, Where, Why?Who: Senior execs, Department directors, people with quotas & /or quantifiable time-driven targetsWhen: Annual, based on company & individual performance, spot grants can be usedWhere: After minimum revenue or break-evenWhy: Reward quantified short term performance
25. Bonus PlansMechanicsBonus = Corporate Performance * Individual Performance * Base Salary %.Bonuses will be paid twice yearly, at the discretion of the CEO. Bonuses will only be paid if corporate AND individual performance are 50% or higher and the company is profitable.
26. ESOPWho, When, Where, Why?Who: Depends. Everyone? Admin? Senior team?When: At time of hire. Spot grants & annual top upsWhere: Anytime after ESOP in placeWhy: Reward long term performance
27. ESOPHow Much?Senior Management - % of companyNon-founder CEOs - 8 - 10%Founder CEOs - 0 - 3%COO / President - 3 - 5%CFO - 1 - 3%CTO - 1 - 3%VPs 0.75 - 1.5%Team - % of base
32. Early exerciseESOPSuggestionsAlign grant with real contribution & role impactMake them real!Follow standard structureVest everyone on exit Voting Trusts, buyback rights