Monday, September 11, 2017

Phantom Stock as a Way to Get 'Equity Compensation' from Family Businesses

On September 6, 2017, CEOWorld magazine published an article I wrote on “Getting the Benefits of Equity Compensation from Family Businesses through Phantom Stock.

Phantom stock for executive compensation
Photo credit: dotshock
This article was designed for CEOs, C-suite executives and other senior executives who currently work in a family business or are offered a position in a family business and receive now or are offered NO equity compensation because most family businesses do not issue equity to non-family members.

My article discusses the use of Phantom stock as a mean to give the executive a substitute to equal for him or her all the benefits that stock, options or RSUs would provide to the executive in a non-family business.

Techniques used in the past and offered to the reader can produce a true “win-win” by providing key benefits to the family business as well as to the CEO or other senior executive, including the following
  • For the Family Business: Creates key executive recruitment tool to offer stake in growth and effectively compete with equity offered by non-family businesses, plus “golden handcuffs” to retain the services of senior executives over the years
  • For the Family Business: Provides this tool with no usage of actual stock or options and no rights as stockholder of company
  • For the Family Business: All payments made under the plan are fully tax deductible to the family business.
  • For the Executive: Gives executive a meaningful stake in the growth of the business, a true share of what the executive achieves for the business
  • For the Executive: Provides a liquidity feature often missing in stock plans of private companies.
  • For the Executive: Phantom Stock Plans can be structured to replicate options or RSUs, and can also be structured to offers the possibility for capital gains level taxation, in after tax income achieved
My article includes a hypothetical example, where a 55-year-old executive is to take the CEO position as successor to the 75-year-old family CEO.  In this example, the successor CEO negotiates for the establishment of a phantom stock plan as a condition to taking the position.  The intention is that the successor CEO receive phantom stock under the phantom stock plan as an important part of his (her) executive compensation package and that the plan would continue after that to enable the successor CEO to use phantom stock to recruit other non-family senior executives to further bolster management of the family business.

To see my full CEOWorld magazine. article, please go to my website:

With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide.

It is my hope that this article will be helpful to (1) CEOs and senior executives working in family businesses, (2) CEOs and senior executives considering taking positions in family businesses, and (3) leaders of  family businesses seeking to recruit non-family members as the new CEO or other senior executives.

If you or any colleague of yours has a need in this area, please do reach out to me, your executive employment lawyer, at or call 617-875-8665.