Incentivizing Employees with Phantom Equity

In this episode of OK at Work, attorneys Sarah Sawyer and Russell Berger from Offit Kurman discuss the concept of phantom equity and its role in incentive compensation. As year-end approaches, businesses evaluate bonuses and future incentives. Phantom equity, a form of compensation for executive-level employees, operates like actual equity without involving ownership or entanglements. It serves as a mechanism to align company and individual goals, especially during events like a business sale, by promising bonuses based on hypothetical ownership stakes. Ideal for fostering an ownership mindset without the complexities of real equity, phantom equity offers a flexible and strategic incentive option.

00:00 Introduction to Incentive Compensation

00:48 Understanding Phantom Equity

01:30 Benefits and Uses of Phantom Equity

02:25 Comparing Phantom Equity to Actual Equity

03:53 Conclusion and Final Thoughts