In this episode of OK at Work, attorneys Sarah Sawyer and Russell Berger from Offit Kurman discuss the concept of phantom equity and its role in incentive compensation. As year-end approaches, businesses evaluate bonuses and future incentives. Phantom equity, a form of compensation for executive-level employees, operates like actual equity without involving ownership or entanglements. It serves as a mechanism to align company and individual goals, especially during events like a business sale, by promising bonuses based on hypothetical ownership stakes. Ideal for fostering an ownership mindset without the complexities of real equity, phantom equity offers a flexible and strategic incentive option.
00:00 Introduction to Incentive Compensation
00:48 Understanding Phantom Equity
01:30 Benefits and Uses of Phantom Equity
02:25 Comparing Phantom Equity to Actual Equity
03:53 Conclusion and Final Thoughts
