Equity Alternatives: Restricted Stock, Performance Awards, Phantom Stock, SARs, and More

by Joseph S. Adams, Barbara A. Baksa, Daniel D. Coleman

Employee ownership has become commonplace in the US economy and, increasingly, worldwide. We at the NCEO estimate that at least 25% of the US workforce owns stock in its employer through an employee stock ownership plan (ESOP), stock option plan, 401K plan or stock purchase plan. This growth is not surprising in light of consistent research showing that companies that share ownership broadly with employees consistently outperform those who do not, especially if they combine ownership with a highly participative management style. It also is consistent with a changing economy in which speed, innovation, and information are essential business resources. The more employees who think and act like owners, the more successful a company will be. At the same time, the growth of employee ownership builds a momentum of its own. As more employees get ownership,more employees ask for and expect it.

For many companies, the route to employee ownership is through a plan such as an ESOP, 401k plan, stock option or employee stock purchase plan (ESPP). But for others, these plans, because of cost, regulatory requirements, corporate considerations, or other issues, will not be the best fit. Still other companies have one of more of these plans but want to supplement them for certain employees with another kind of plan. For such companies, alternative equity or equity-equivalent plans such as phantom stock, stock appreciation rights, direct stock purchases, or restricted stock may work better. Additionally, companies using stock options may with to grant them as performance-based awards. This book is written for all these companies. It provides an overview of the design, implementation, accounting, valuation, tax and legal issues for the plans it covers and also provides sample plans.

318 pages, Paperback

First published July 1, 2003

About the author

Joseph S. Adams is Chicago Practice Leader - Employee Benefits Tax Services for Deloitte & Touche. Mr. Adams is a specialist in the design, drafting and ongoing qualification of pension and profit sharing plans, 401(k) plans, nonqualified deferred compensation arrangements and welfare benefit plans. He is also a contributing editor of the Pension Plan Fix-It Handbook and the Guide to Assigning & Loaning Benefit Plan Money, both published by Thompson Publishing Group, Inc. He is a 1992 graduate of Cornell University Law School.