Management equity alignment

Using equity-linked incentives to encourage management decisions that increase long-term equity value. Alignment depends on grant terms and behavior, not just the size of the award.

Management equity alignment in round numbers

Hypothetical: an option pool represents 10% of the equity on a defined fully diluted basis, including that pool in the denominator. A grant is not necessarily current issued ownership or 10% of exit proceeds. Vesting, exercise prices, hurdles, dilution and exit rights determine its economic effect.

Management incentive plan (MIP) · Sweet equity & envy ratio · Vesting · Rollover equity · Option · All of the glossary