N.R. Gordon & Company offers a broad range of value-added,
peer-to-peer, financial advisory and strategy consulting services. Representing
not only the client, but the client's point of view, N.R. Gordon & Company
differentiates itself from other advisors.
Management and shareholder interests must align for a company to
achieve its strategic objectives. The link between shareholder value and
management remuneration in the form of incentive compensation is the critical
element that rewards those who run the company for protecting the interests of
those who own it.
To be effective, incentive compensation must reward management for
achieving objectives that serve the interests of the owners. Because an
increase in shareholder value is almost always the ultimate objective,
management is often given an equity interest in the company. Particularly in
public companies, management and shareholder interests are aligned by providing
incentives in the form of stock options or other forms of equity. Providing
compensation in the form of equity also conserves a company's cash and can
provide capital with which to fund ongoing growth. For senior executives in
particular, equity incentives have been a path to significant wealth.
Case study:
Client: Family owned service company.
Situation: Client was about to consummate an acquisition and would
be incurring a substantial amount of debt.
Objective: Encourage growth, the aggressive repayment of debt and
the creation of substantial shareholder value.
Solution: The plan we
designed provided management with incentives for achieving targeted levels of
cash flow and returns on invested capital. To provide a longer-term incentive,
amounts earned were partially deferred and were subject to a vesting schedule.
A substantial equity equivalent was provided through the creation of restricted
stock and stock option equivalents which increased in value as earnings
increased and as debt was repaid. As the company remained private, earned
incentives are deferred until the managers' retirement from the company,
providing the company with a substantial cash flow benefit while providing its
employees with a tax deferred supplemental retirement benefit. A provision of
the plan will convert the benefits into shares of common stock if the company
goes public.
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