Our Approach:
Particularly in bio tech, multimedia, Online, cable and telecommunications and related high tech companies, stock options, restricted stock / units and other equity acquisition programs have become important and integral parts of total compensation. Without both "hire" and "ongoing stock" option grants, many companies that compete for their human resources in the technology sector are severely disadvantaged. The Croner Company has assisted a wide variety of clients with the development of their stock option, restricted stock, stock purchase and equity-equivalent, e.g., "phantom" shares plans. Often, we develop equity acquisition plans as part of other projects to create comprehensive compensation plans. At other times, we will work only on the design of stock option, preferred stock or equity-like plans.
Typically, we value equity grants as part of our development of long-term compensation plans. These valuations include such “standard” methodologies as Black-Scholes. We also have worked with private companies to develop valuation methodologies for their equity. We also have worked with a variety of companies to ensure their compliance with FAS 123 regulations regarding expensing stock options and related long-term compensation elements.
We believe the best equity acquisition plans are those that focus clearly on long-term contributions to increasing the company's value, typically represented by the company's stock price or its market "cap." We work closely with our clients during the design, development and implementation of their stock option plans and then continue to work with these clients over the years to update and maintain these plans.
Key Project Steps in the Design of a Long-Term Equity or Equity-Like Plan:
Philosophy.
Working closely with management, we define the company's philosophy regarding equity participation as well as its unique objectives for its stock option or equity-like plan or plans. In this initial step, we also identify the employees who will participate in the equity acquisition, the basis for selecting plan participants and the amount of stock available for grants. This step often entails extensive interaction with the company's board of directors to determine the proportion of the company's total shares outstanding that will be authorized for employees, directors and others.
Range of Stock Option or Equity-Like Awards. Next we work with management to determine the range of stock option or equity-like awards that have been made in the past, and management's philosophy for granting participation in equity acquisition programs. In this step, we also address the following questions: How will equity participation awards be determined? How frequently will grants be made paid? What level of employee will participate?
Administrative Guidelines.
We develop a market-based equity participation plan and administrative guidelines for making stock option grants or grants of equity-like "units." This step often entails estimating the present value of stock options granted by using such valuation techniques as Black-Scholes or the present value of future gain method. The result of this step is the specification of "hire" and "ongoing" grants by organization level.
Annual "Update". In most cases, we conduct an annual "update" of the cash incentive plan to bring the plan, in all respects, into a competitive market position, to track changes in product or service offerings and to make other needed modifications.
|
