Equity Based Compensation Plan

Equity Based Compensation Plan

Introduction

The concept of equity based compensation plan enables the interference of employees to become stakeholders of the company. This is a key feature that organizations tend to activate in order to involve the highly motivated employees as this features to partially hold a stake in the organization in the course of receipt or purchase of stock options.

The offer given to the employees has another key aspect attached to the organization and the top management since it allows them to integrate the involvement of the top employees in the organization with their valuable addition in the decision-making hierarchy (Kalfen, 2005). In the benefits that the employees have is that the attain power and respect along with the option to cash their stock options, which helps them in escalating their plans of compensation.

Discussion

Equity based compensation plans are becoming necessary for the firms these days due to the intense competition and retaining the employees, which are necessary and key players for the firms. Moreover, the reason attached with the involvement of equity-based reimbursement plans are many for instances at the time when companies are performing better, then the management intends to attract employees, which are key personnel and necessary for the company to retain.

However, at times when the organizations are facing an economic downturn, the compensation plan can act according to the situation as it provides benefits, which are additional to the employees in building a relationship such as loyalty. In this case, the company or the firm engages with the employee without distributing additional cash to the employees.

The business-oriented organization in regards to contemplate a compensation plan based on equity must consider its strategic objectives very carefully as the aim is it depends on the determination of the type of plan that the organization is ...