Deloitte’s take on equity

Aligning short-term needs with long-term goals

If “necessity is the mother of invention”, then the current business environment is the time to rethink routine business operations, including long-term incentive compensation strategy. Many organizations are thinking differently as they look to balance the need to conserve or generate cash and manage share usage and dilution levels while at the same time continuing to incentivize and retain key talent.

We have presented below five equity compensation strategies which could provide companies the flexibility to pull some immediately available levers to re-align their global incentive compensation strategy with current critical organization-wide priorities during a depressed, volatile market.

These planning opportunities are principally focused on a broad-based employee population and special consideration should be given to executive compensation particularly as each of these planning opportunities has many elements which must be considered. The elements to be thought through range from corporate governance, HR strategy and compensation philosophy and talent objectives to legal and regulatory impact. Further, careful review will need to be given to individual tax and payroll implications, finance, and accounting consequences as well as the optics of making changes to the global incentive compensation strategy in the current market. As such, these equity compensation strategies should be reviewed holistically with professional advisors and relevant stakeholders to determine their tax, legal, and accounting viability for your company before taking action.

In addition, the impact for plan participants will need to be carefully weighed, and the communications aspects should be thoughtfully managed in these times where many internal employee communications have ramped up significantly.