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Private companies and employee equity: make LTIPs work for you

long term incentive plans for private companies

Fred runs a large company, Tangerine. They specialise in exporting citrus fruit, and over the past two decades, they have been extremely successful. Last year, they nearly broke nine figures in profit.

There was one problem, though. Fred started his company in 1998. He was 70 years old. He’s now 90, and while he’s not slowing down – his morning fitness routine sounds more strenuous than mine – he has started to make plans for transitioning the business after he retires.

Fred has always cared a lot about his employees. Right from the start, he was a firm believer in profit-sharing. Some employees recall that they were able to send their children through school on these extra bonuses.

So, Fred didn’t know what to do. He wanted to retire comfortably, he wanted to make sure his business continued to grow, and he wanted to make sure that his employees were well taken care of.

Tangerine is a private company, and they certainly had plenty of callers – interested in taking them public or acquiring them. But Fred couldn’t do either of those. Neither one would guarantee all three things on his list.


Fred came up with an idea. A long term incentive plan (LTIP).

And not just any old long term incentive plan – one that would work for him. He decided on a Restricted Stock Units (RSU) scheme. This did two things. It gave a great incentive for employees to remain with the company – the longer they work at Tangerine, the bigger their payout. But not only that – how hard they work, and how well the company performs also affects how large their payout will be. With just one plan, Fred came up with a great way to merge two great benefits into one solution for his dilemma – ensuring his company would continue to grow.

If that was all the LTIP did, that would be fantastic. But Fred didn’t just implement any LTIP. Fred’s LTIP didn’t just ensure that his company would have the best employees, it also ensured his other two needs – to retire comfortably, while ensuring his employees were looked after. Because now, the employees own the company. With his LTIP, he has converted the private company that he owned, to a private company that his employees own. He can be sure that they’ll be taken care of – after all, they’ll be taking care of themselves.


That’s the power of an LTIP that works for you.

It can transform your business in more ways than you can imagine. And because private companies don’t have a public market or the easily accessible company valuation it supplies, it’s more important than ever for private companies to ensure their LTIPs are designed in a way that benefits their company in more than one way.

There are plenty of LTIPs available to private companies. I would list them all here, but to be honest – there are just too many. Not only that, but even if I listed each one, and gave a brief overview of the positives and negatives of each one, it wouldn’t be accurate. That’s because so much of the benefits depend on your company’s location, structure, industry, etc. And LTIPs are incredibly flexible – each scheme can be customised ad infinitum.

Your best bet is to go through all of the different designs and schemes with somebody who specialises in equity compensation management. Otherwise, you could potentially be using the wrong LTIP.

What if Fred didn’t know about RSUs – what if he found an LTIP that was pretty good, and he figured that was as good as he would get? He might’ve managed to retire, or keep his company successful, but he couldn’t have done both of those, as well as looking after his employees if he had chosen the incorrect LTIP.


At Global Shares, we have 14 years of award-winning equity compensation management experience. We can take you through setting up an LTIP that will bring out the best in your company. Contact us for a commitment-free demo today.


Click here to read more about Long term incentive plans and how we can help you.

Please Note: This publication contains general information only and Global Shares is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. The Global Shares Academy is not a substitute for professional advice and should not be used as such. Global Shares does not assume any liability for reliance on the information provided herein.

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