Overview
Phantom stock is a retention tool used by companies to keep and reward employees. This works by giving employees phantom stock units or credits that represent the value of the company’s stock. As the company’s stock value increases, so does the value of the phantom stock, giving employees a reason to work hard and help the company succeed. One of the benefits of phantom stock is that it motivates employees without giving them actual ownership in the company. Additionally, by offering the option to eventually buy real company stock through the phantom stock plan, employees will have even more reason to work towards the company’s success. Overall, phantom stock plans are a smart way to retain and motivate employees while also making the company better.
Transcript
Hi there! This is Byron. I’m a reaching
you today from the Black Hills of South
Dakota at Castle Creek –
one of my favorite fishing spots when I
come up here.
I want to share with you a planning
technique we commonly use in either
incentive plan designs or in exit plants.
The tool is called phantom stock.
The way phantom stock works is that the
company creates a units of ownership
that then they grant to the key
employees, either through a deferred
bonus or as an outright grant. Then,
as the company appreciates in value,
the account balance grows with the
appreciation and the company’s value.
Then, when the owner is ready to exit,
the plan design could anticipate the
exit timetable, vest and pay out the
benefits to the key employee, who then
could use those dollars to help offset
the purchase price, and maybe, make the
transaction a little more bankable.
