Here's where you can learn and follow the steps used by professional consultants to design and implement effective phantom stock plans. Review these steps along with the tools, wiki and videos to get a start on your perfect plan.
Select Your Plan and Set Your Budget
Be clear on exactly what you want your plan to accomplish. Do you have a purpose? Retention, focus, ownership mentality? How will you know you produced a positive result from adopting a phantom stock program?
Give some thought to how big your future company may be compared to today’s company. This is important so that you can envision how much value you may be able to share with your employees.
List your potential plan participants. Allow for future positions that may not exist yet.
Carve out a budget. How much of your future value would you like to share with your employees? Use this tool.
Considering your goals and value sharing opportunity, select the right plan for your company. Use this tool.
Determine Your Basic Plan Terms
Using a spreadsheet, assign relative values for your employee participants.
Think through your Level 1 plan provisions and make some preliminary decisions. These include things like vesting, grant schedules, payment timing, etc. For guidance, visit our wiki.
Test variations in your Level 1 terms so that you can assess plan values and costs. Will these terms likely result in your desired value-sharing levels?
Choose the right level of awards for your participants. This isn’t final yet, but should be close.
Using your best judgment select your plan terms (vesting, etc.). These aren’t final either. But they should be close.
Lock Down Your Financial Commitment
You’ll probably have an annual earnings charge for your plan. Confirm that it suits your expectations and budget. Information on plan accounting can be found here.
Examine whether you’ll fund your plan. This is optional. But it may possibly lower the overall cost impact of the plan. Here’s some guidance.
If your earnings or cash flow results aren’t what you desire, now’s the time to return to Stage Three and revise your grant guidelines or Level 1 terms.
Finalize your grant schedule, Level 1 terms and funding plan.
Document Your Plan
Now’s the time to make Level Two decisions. These include things like term definitions, separation of service payments, change-in-control results, and other events and conditions that may arise as you operate your plan.
Record all your plan decisions in preparation for meeting with your legal advisor.
Draft your plan document, including any necessary employee forms. Consult with a qualified attorney. More about documentation can be found here.
Execute your plan document.
Launch Your Plan
Prepare an announcement meeting, led by the CEO, to inform and inspire your employees.
Award the individual grants privately to seal the partnership commitment.