Equity Compensation 101
By Gary T. Moyer, April 11, 2000

Why Use Equity Compensation?

• Company Perspective

• Discrimination is generally allowed

• Ties the employee financial reward to the success of the business, thereby more closely aligning the employees self-interest with the Company founder’s self-interest

• It does not generally involve Company cash and is therefore an attractive compensation technique for start-ups (or any Company that is not a cash cow)

• Can generate "leveraged" tax deductions, namely deductions in excess of the Company cash expended

• Employee perspective

• "Everybody’s" doing it! Company Translation: in a tight labor market it allows the Company to better attract and retain key employees

• Employees perceive an ability to be the beneficiary of a financial "home run"

• Often the employee has no downside risk

• Tax benefits

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