Intentional Growth

#222: The Ultimate Guide to Executive Compensation Plans: Aligning Short- and Long-Term Incentives to Value Creation


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Today’s episode is all about designing the most effective executive compensation structures while avoiding the most common mistakes. Craig shares how to come up with the perfect formula (designed off the financials and not some insurance product) that rewards employees in the short- and long-term, increases the value of your company, and pays for itself.
 
What You Will Learn In Today's Podcast Interview
What phantom stock or stock appreciation rights (SAR) plans are and how to make them work for you.
How to transform employees into growth partners.
Why it’s important to discover your employees’ ideal compensation structure.
The benefits of using long-term planning when looking at appreciation awards and why normalized EBITDA is often the best evaluation metric.
How to transaction-proof (plan for both a transaction OR keeping the business) your compensation plans.
The strength of an abundance mindset over a scarcity mindset.
How to account for phantom stock liability and protect all parties, as well as learn the difference between funded and naked liability.
The value of communication and transparency during planning to draw in the most qualified people who will help you smash through your ceiling.
How to build and sustain a high-performing culture while getting your executives to pay for themselves.
The most common valuation metric for compensation plans is EBITDA x multiple - debt + cash.
 
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Podcast Summary
Today’s episode is all about designing the most effective executive compensation structures and how you, as a business owner, can come up with the perfect formula that rewards employees in both the short- and long-term, increases the value of your company, and pays for itself. Craig Rutledge, alongside his company VisionLink, has been designing executive compensation plans for over two decades. He details multiple ways you can reward top performers with (phantom) equity that vests over time, based on the growth in the value of the business. Not only will Craig’s examples highlight the incredible benefits to your business of awarding short- and long-term achievement, he’ll also talk about the potential pitfalls equity-based compensation plans open you up to, as well as how to protect yourself from them. The right exec comp packages will not:
Award equity without increasing company value
Vest too fast
...more
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Intentional GrowthBy Arkona - Intentional Growth