Incentive presentation 070410

Incentive Plan Seminar
Mark MacLeod
April 2010
startupcfo.ca
@startupcfo

Agenda
Incentive Compensation
What does incentive mean?
Issues
Suggestions
Bonus Plans
ESOP
Questions

Introduction
Me:

Incentive Comp
Incentive:
any factor (financial or non-financial) that enables or motivates a particular course of action.

What Motivates You?
Depends….

Incentive Drivers

Issues
Structuring Incentive Plans:
Who designs them vs. who is impacted
Where to focus? Strategic vs. Practical
Cause and effect
Clarity
Alignment
Culture
Inconsistency
Frequency

Suggestions
Start with practical, non-financial incentives
Make goals clear and tied to individual / team actions
Annual goals and quarterly goals
Communicate consistently & regularly
Reward excellent results and those people who
make them happen

Bonus Plans
Who, When, Where, Why?
Who: Senior execs, Department directors, people with quotas & /or quantifiable time-driven targets
When: Annual, based on company & individual performance, spot grants can be used
Where: After minimum revenue or break-even
Why: Reward quantified short term performance

Bonus Plans
How Much?

Bonus Plans
Mechanics
Bonus = Corporate Performance * Individual Performance * Base Salary %.
Bonuses will be paid twice yearly, at the discretion of the CEO. Bonuses will only be paid if corporate AND individual performance are 50% or higher and the company is profitable.

ESOP
Who, When, Where, Why?
Who: Depends. Everyone? Admin? Senior team?
When: At time of hire. Spot grants & annual top ups
Where: Anytime after ESOP in place
Why: Reward long term performance

ESOP
How Much?
Senior Management - % of company
Non-founder CEOs - 8 - 10%Founder CEOs - 0 - 3%COO / President - 3 - 5%CFO - 1 - 3%CTO - 1 - 3%VPs 0.75 - 1.5%
Team - % of base

ESOP
Benchmarks

ESOP
Issues
Top heavy
Valuable?
Unfair rules
Early exercise

ESOP
Suggestions
Align grant with real contribution & role impact
Make them real!
Follow standard structure
Vest everyone on exit
Voting Trusts, buyback rights

Questions

Incentive presentation 070410

by Mark MacLeod

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