March 3, 2014
The Differences Between “Pay” and “Equity”
– Broc Romanek, CompensationStandards.com
In this article, Paul McConnell and Jeff McCutcheon of Board Advisory identifies what they believe to be a fundamental problem with executive compensation – thinking about equity as just another form of pay. Here’s a summary of the article:
It is equity – i.e., the executives “share of the deal”. Venture capital and private equity get the distinction. It is time public companies did. We have been beating around this bush for years with walk away calculations, competitive annual grants, ownership requirements etc. If we just acknowledged that there was a pay piece and an equity piece that are fundamentally different, a lot of these issues with go away – including the firestorm that will come from the new Dodd-Frank pay ratios.