Structuring equity compensation plans to drive differentiation*

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Structuring equity compensation plans to drive differentiation*

At a glance

The PwC 2008 Private Equity Portfolio Company Stock Compensation Survey results reflect increasing variation in the design and utilization of equity compensation plans.

The PwC 2008 Private Equity Portfolio Company Stock Compensation Survey results reflect increasing variation in the design and utilization of equity compensation plans. This provides an opportunity to adjust historic approaches to achieve a better fit with business objectives. As with the public marketplace, equity values of portfolio companies (especially those acquired in 2007/2008) have fallen and many employee stock options are well below the initial strike price, reducing (or eliminating) their effectiveness as a retention/performance tool. Activity around the adjustment of underwater equity (e.g., repricing) is expected to ramp up significantly in 2009 and so it may be appropriate for private equity sponsors to consider alternatives available to address underwater equity.