Comments on: Why Giving Your Employees Phantom Stock Can Boost Your Company

By: Mike

Mike — Thu, 20 Oct 2011 18:40:55 +0000

If an S corporation company has an abundance of employee phantom stock and the offical agreement states that the phantom stock (points)becomes common stock upon a triggering event and one triggering event is when the founders/owners own less than 90% of the voting stock for which the company changed the total number of shares from 1 million to 1,000 stocks and their corporate documents clearly show that the founders/owners have retained less than 10% of the stock. Would this constitute a triggering event for which the stock agreement would allocate the remaining 90% of the stock to the employees and if so can they go back and change any or all information which appears may happen.

By: Paul

Paul — Wed, 23 Jun 2010 16:33:12 +0000

Is phantom stock only available to employees, or could it be used where shareholders are not employees. For example in a professional corporation where all professionals are shareholders?

By: Paul

Paul — Wed, 23 Jun 2010 16:33:00 +0000

Is phantom stock only available to employees, or could it be used where shareholders are not employees. For example in a professional corporation where all professionals are shareholders?

By: Matt

Matt — Mon, 31 May 2010 20:11:39 +0000

Cheers Startup Lawer –

Can anyone recommend additional resources that would be helpful in investigating Phantom Stock applicability for a startup and additional resources for more in depth information about the nitty-gritty details?

Thanks!

By: Matt

Matt — Mon, 31 May 2010 20:11:00 +0000

Cheers Startup Lawer –

Thanks!

By: Trey

Trey — Wed, 12 Aug 2009 17:35:55 +0000

Assuming funds were set aside in a rabbi trust to defer taxes, is that something that is generally accessable? For instance, I am willing to take on a particular position for a salary lower than I am accustomed to with the belief that it will benefit me greater being included in a phantom stock plan. Would I then be able to remove a portion of the funds set aside to supplement my salary while leaving the remainder to grow?

By: Trey

Trey — Wed, 12 Aug 2009 17:35:00 +0000

By: Ryan Roberts

Ryan Roberts — Sun, 29 Mar 2009 21:14:14 +0000

Amy,

I think you have to develop your own formula based on the time value of money, vesting schedule, payout triggering event schedule, payout types (cash, stock, etc.). It really becomes a personal valuation but those are the typical considerations.

By: Amy

Amy — Tue, 17 Mar 2009 09:44:29 +0000

How does an employee value phantom stock as part of a compensation package? For instance, if phantom stock is offered at year 3, to be "vested" at year 5 (when you start receiving dividends in cash), how do you value that amount in year 3, before it's actually earned?

By: Amy

Amy — Tue, 17 Mar 2009 09:44:00 +0000

By: Ryan

Ryan — Wed, 05 Mar 2008 14:18:30 +0000

To answer your first question, I believe what "long-term" motivation means for the employee is shrinking in length. Unfortunately for the business owner, "long-term" for the average employee could simply mean the next pay period.

As to the second question, giving employees equity (instead of phantom stock) does give them more certainty. But their certainty comes at a potentially steep price for you, especially if you have no previous experience with the employee.

Each employee will have his or her own tolerance for both the type of incentive and the length of the vesting period. In the least, you can use the somewhat longer vesting period (for phantom stock) to filter out those employees who are likely to jump ship rather than stay around long term.

By: Ryan

Ryan — Wed, 05 Mar 2008 14:18:00 +0000

By: Florence

Florence — Mon, 03 Mar 2008 16:55:45 +0000

I am trying to put together a compensation package for my employees. My company is still in its early startup stages and from experience with a couple others I tried to bring on to the company, I am not sure I want to give away equity easily. Phantom stocks sound like a good idea but I am not sure if my employees will buy it? It does motivate them to work hard to grow the company's value, but if they know they have to work for 1-2 years before they can reap the rewards of their efforts, will their motivation last that long?

Also, during the uncertain early phases (when the team is working to achieve proof-of-concept), it seems that equity providing employees with the right to vote, dividends, winding up…give employees more certainty than phantom stocks?

By: Florence

Florence — Mon, 03 Mar 2008 16:55:00 +0000