The Great Equity Debate: Are We All Just Chasing Our Tails?
The Great Equity Debate: Are We All Just Chasing Our Tails?
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February 10th, 2025
Written by Frank Glassner, CEO
Veritas Executive Compensation Consultants
Today, let’s explore labyrinthine world of equity compensation, where every stock option or warrant convertible to common is a Pandora’s box and every RSU (Restricted Stock Unit) might just be a Trojan horse. Welcome to the great equity debate, where the question isn’t just about how much, but also, what, why, where, how, and when.
Equity Compensation: The Siren Call to Senior Executives
It’s the age-old allure of equity that keeps the C-suite buzzing. Whether it's stock options, RSUs, or those equity-based performance shares; equity compensation remains the golden goose of executive reward strategies.
But as the market wobbles like Eric Idle writing Monty Python’s beloved Philosopher’s Song the cracks in those golden eggs are beginning to show (“Aristotle was a bugger for the bottle, Hobbes was fond of his dram, And René Descartes was a drunken fart, I drink therefore I am” - Philosopher's Song - a ditty penned by Idle, which alluded to the capacity of history's great thinkers [like us executive pay gurus] to sup from the cup of Bacchus - was a moment of cerebral comedy genius).
Stock Options: Riding the Wall Street Rollercoaster
Once the darling of executive pay dreams, stock options were the classic carrot dangled in front of executives. They promise the moon, if only you can hang on long enough for the vesting period to expire without the company tanking.
But here’s the kicker: they’re as volatile as your last earnings call. One minute you’re on top of the world; the next, you're just on top of your overdraft.
RSUs: The Safer Bet?
Enter RSUs, the more grounded cousin to stock options. They’re like comfort food for the risk-averse soul, offering less "what if" and more "what is." Granted on a schedule and less susceptible to market mood swings, RSUs are like having a savings account that grows on company time. But where's the fun in that?
If you’re looking for the thrill of a night out at the casino, RSUs might just leave you yawning.
Performance Shares - The Goldilocks of Equity Awards
And then there are those performance shares, the Goldilocks darlings of executive pay. Not too risky, not too safe, just right—if you can hit those hopefully well-chosen performance targets.
They tie your rewards to how well you do your job, rather than how well the market’s doing its job. Sounds fair, right? Until you realize that your fate might be tied to factors as unpredictable as global economics or consumer whims.
The Debate Heats Up: Retention, Motivation, and the Equity of Equity
The great equity debate isn’t just a financial discussion; it’s a philosophical quagmire. What’s fair? How do we motivate without manipulating?
How do we retain talent without handcuffing them to their desks? These are the questions that keep compensation committees, and their pay consultants up at night.
Finding Our Way Through the Equity Maze
As we stride into the future, the ecosystem of equity compensation is as uncertain as ever. With regulatory scrutiny tightening, as well as shareholder watchdogs, hedge-funds, institutional investors and activists breathing down our necks, the challenge is to craft leading-edge, company-specific executive compensation programs that are clearly defined, easily understood, and are as attractive as they are sustainable.
The Veritas Verdict
Here at Veritas Executive Compensation Consultants, we don’t just follow the trends—we set them. Whether you’re looking to stir up your executive pay strategy or simply keep your head above water in the equity pool, we’re here to lend you a helping hand.
So, as you ponder your next move in the great equity game, remember: it’s not just about playing the market - it’s about playing the long game. Let’s strategize together to make your executive pay programs work not just for the board or the folks in the corner office, but for everyone who’s betting on the success of your company.
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