Incentive Programs - Technology Association of Iowa激励计划-爱荷华科技协会.ppt
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1、Incentive Programs,Kathy Zehr LWBJ Capital Advisors,1,Types of Incentive Programs Short-term Mid-term Long-term Goals of Each Program Participants in Program,Incentive Program Topics,2,Start-up companies often use stock as incentives since cash is sometimes tight and borrowing from banks somewhat co
2、stly and difficult to obtain. More established companies will likely build more cash compensation in their overall mix. Incentive programs very common and make your company competitive with larger employers vying with you for talent. Plans also aid in employee retention. Need to be mindful of overal
3、l compensation program strategy.,Incentive Programs,3,Comparing Incentive Plans,4,What measures are used by similar companies in my industry? What are opinions of my accountant, investors and key managers? Do I use the same or different measures for different groups of participants? Do I reward grou
4、p, individual or both types of performance? What is the length of earn-out for the plan?,Determining Performance Measures,5,Virtually all plans are performance-based and should not become entitlements. Bonus plans should be written documents shared with all participants. Objectives: Tied to realisti
5、c, quantifiable and achievable goals Simple to understand Easy to measure Employer deducts these payments as business expenses. Employee pays income tax when paid the bonus.,Short-term Incentive Plans,6,Important to define metrics and how they will be computed to ensure consistency. Good to build in
6、 higher rewards for exceptional performances. Clearly define employment conditions and how changes in status affect bonus. Provide quarterly updates to keep participants focused on goals. Annual review to insure plan remains relevant to current company initiatives.,Short-term Incentive Plans,7,Sampl
7、e ST Incentive Plan,8,Generally less common than short-term or long-term plans. Same type of general rules as short-term plans Bonus plans should be written documents shared with all participants Objectives: Tied to realistic, quantifiable and achievable goals Simple to understand Easy to measure Vi
8、rtually all MT plans are performance-based emphasizing teamwork (company) performance. Can be set up as a cumulative measure (each year adds or subtracts towards three-year goal) or attainment of a goal at end of year three.,Mid-term Incentive Plans,9,Important to define metrics and how they will be
9、 computed to ensure consistency. Good to build in higher rewards for exceptional performances. Clearly define employment conditions and how changes in status affect bonus. Provide at least annual updates to keep participants focused on the goals.,Mid-term Incentive Plans,10,Incentive plan to earn sh
10、ares based on dollar value if company reaches targeted ROE (return on equity) of 15% at the end of a three-year period. ROE is computed as year three after-tax earnings divided by total equity as determined by the annual audit. Target value of shares is $40,000 over three year period for employee wh
11、ose base is $60,000; or 22% of base pay over three years. Eligible to all managers and above. Employee must be employed by company on the date of the payout announcement which must be within 75 days after the end of the third fiscal year.,Sample MT Incentive Plan,11,Participants rights to receive pa
12、yment of shares under an award shall be determined based on the following schedule:,Sample MT Incentive Plan,12,Almost always equity-type awards. Most common are Stock options Restricted stock Phantom stock Stock appreciation rights Employee stock purchase plans Accounting issues can be somewhat com
13、plex for certain equity awards. Taxability issues vary greatly depending on type and terms of awards for both awardees and employer.,Long-term Incentive Plans,13,Right to buy a number of shares at a price fixed at the grant date at some date in the future. Stock options can: Vest based on a service
14、period - over time or cliff vest Vest based on performance - achieve a level of revenues Once vested, options can be exercised at the grant price at any time up to the expiration date of the option. Two kinds of stock options: Incentive (ISO) Tax advantages to defer taxation from the date of exercis
15、e until the date of sale and qualify for capital gains rate Several conditions (including 10 year life, limited number available each year, and minimum holding period) Non-qualified (NSO) Taxed at ordinary income rates at exercise date,Stock Options,14,Two primary ways to exercise stock options: Use
16、 cash to purchase the shares. 1,000 options granted at $10, pay $10,000 for shares now worth $20 or $20,000 Use a cashless transaction requiring you to exercise enough options to cover the exercise price. 1,000 options granted at $10, stock price now $20, exercise the 1,000 options and sell 500 at t
17、he current stock price to get the $10,000 needed to exercise the options,Stock Options,15,Private companies do not have as much flexibility as publicly-traded firms. They are the market for any stock option exercises. Business valuations are required at the grant date and any exercise date and can b
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