What contribution over time would make sharing the upside worthwhile?
Building a capable management team or a dependable recurring revenue system can take several years. Long-term participation can connect that sustained contribution with a meaningful opportunity for the person doing the work.
Start with the person, the business and your ownership goals. Consider what happens if you keep the company, sell it or change your role. The decision should make those choices clearer.
Decide what the arrangement should accomplish
Use the leadership roadmap to identify the contribution you need, the people who might provide it and the alternatives. Recruiting a leader, retaining someone and rewarding durable improvements can involve different conditions and costs.
Discuss what would make an opportunity meaningful. Someone may value current income or a clearer role more than uncertain future participation. Personal financial disclosure remains voluntary. Compensation supports development and responsibility; it does not guarantee loyalty or capability.
A supported decision against a new grant can be appropriate. Record the reason, alternatives and reconsideration trigger. An unfinished design awaiting essential terms is still unfinished. Existing promises need review whichever direction you choose.
Understand the instrument and the value basis
Phantom stock measures a contractual compensation benefit using a defined company value without issuing actual ownership at grant. Actual equity provides an ownership interest whose rights depend on the entity and governing documents. A label alone does not settle control, tax, cost or payment.
Distinguish full value from appreciation above a baseline. In a hypothetical example, a defined value rises from $5,000,000 to $8,000,000. A 1% full-value calculation is $80,000. A 1% appreciation calculation is $30,000 before vesting, payment terms and other adjustments. These are illustrative economics, not recommended grants or cash available today.
State whether the agreement uses enterprise value, equity value or another defined amount. Name the valuation method, date, inputs, adjustments, reviewer and dispute process. An ownership wealth goal or an offer headline is not automatically the grant’s valuation basis.
Keep grant, vesting, valuation and payment separate
| Part | What the records need to explain |
|---|---|
| Grant | What was actually awarded, to whom and on what date. |
| Vesting | The conditions and portion earned under that grant’s terms. |
| Valuation | The supported calculation using the agreed basis and date. |
| Payment | The events, timing, form and funding required by the agreement. |
For a hypothetical 5,000-unit grant, 50% vested means 2,500 vested units. That arithmetic alone does not establish the amount payable now. Each grant keeps its own baseline, date and conditions. Proposed future grants remain proposals.
Review Grant, Vesting and Payment when a projected value starts being treated as money already earned or ready to withdraw.
Work through keeping, selling and leaving
The terms need to address sale and no-sale outcomes, departure, death or disability, approval and disputes. A sale does not automatically accelerate every award or require payment at closing. A benefit tied to transaction proceeds needs to explain deferred and contingent consideration where relevant.
If the business is retained, identify any payment event and supported source of funds. An increase in estimated company value does not put cash in the bank. Keep the owner’s continuing cash needs visible alongside the company’s obligations.
Work with appropriate finance, legal, tax and payroll specialists before granting an arrangement. Have finance show the relevant expense, liability and payment effects under supported scenarios, with an explicit basis for zero or not-applicable treatment. A reference-model illustration does not establish completed accounting or funding.
Use the tools to prepare a supported decision
| Tool | What it helps you establish |
|---|---|
| The Meaningful Number Conversation | What the person values and how an opportunity could support it. |
| LTI Readiness Checklist | The support, terms and decisions needed before a commitment. |
| Phantom Stock Blueprint | The proposed instrument, value, units, vesting, payment and event terms for a phantom arrangement. |
| Compensation Blueprint | A summary of long-term participation beside the annual commitments. |
Use appropriate equivalent documents for a different instrument. These tools prepare the design and review; they are not grant agreements. Preserve current promises and actual records rather than filling gaps with assumptions from a case example.
Authorize the decision and review the current position
New awards need professionally prepared, adopted agreements accepted by the relevant parties. Explain the opportunity and its conditions in ordinary language. If the explanation and agreement differ, resolve that difference.
A no-new-grant decision needs a dated authorized rationale, necessary communication and clear treatment of earlier commitments. Review actual outstanding grants, vesting, the valuation date and obligations. Where there are no awards, confirm that no earlier promises remain unaddressed and test the rationale against today’s staffing needs.
Name the record keeper, financial and valuation reviewers, next scheduled review and events that bring it forward.
What completion looks like
The company has adopted and reviewed a supported long-term arrangement or a supported decision not to make a new grant, while administering existing obligations. The seven requirements still apply to the chosen route. A prepared brief or future grant date does not establish completion.
Open the seven completion requirements
1. Make a supported participation decision.
Purpose: The purpose and participation decision are supported.
Question: Why is this grant or no-new-grant decision appropriate for the person, company and ownership goals?
Evidence: The owner connects desired contribution, recruiting/retention needs, personal relevance and ownership optionality to a reasoned grant or no-new-grant decision. Private personal disclosure is voluntary.
2. Explain the instrument and economics.
Purpose: The instrument and economics are understood.
Question: What rights and economic consequences follow from the chosen instrument or alternative?
Evidence: For grants, rights, full-value/appreciation basis, units, denominator, baseline and valuation method are explicit. For no new grant, the alternatives and their financial/leadership consequences are documented.
3. Set the conditions and scenarios.
Purpose: The conditions and scenarios are complete.
Question: What happens under sale, no-sale and departure scenarios, or what triggers reconsideration?
Evidence: For outstanding/new awards, grants, vesting, departure, death/disability, sale and no-sale treatment, payment timing and dispute/approval authority are stated under the actual terms. No-new-grant decisions identify the conditions that would cause reconsideration.
4. Obtain the financial and professional support.
Purpose: Financial and professional support is complete for the decision.
Question: What professional and financial support applies to this actual decision?
Evidence: Appropriate finance, legal, tax and payroll review supports the actual arrangement. The model shows relevant expense, liability and payment implications under supported scenarios; zero or not-applicable treatment has an explicit basis. No unimplemented reference tab is represented as acceptance.
5. Document and communicate the authorized decision.
Purpose: The authorized decision is documented and communicated.
Question: What was authorized, accepted and communicated, and how are earlier promises treated?
Evidence: New awards have adopted, professionally prepared agreements accepted by the relevant parties. A no-new-grant decision has a dated authorized rationale, any needed communication and clear treatment of existing commitments.
6. Review the current position using actual records.
Purpose: The current position has been reviewed using actual records.
Question: What does the dated review of actual grants or existing commitments establish?
Evidence: A dated review reconciles actual outstanding grants, vesting position, valuation date, obligations and the decision. A supported no-grant review confirms the absence of unaddressed promises and tests the rationale against current staffing/ownership needs.
7. Assign continuing responsibility.
Purpose: Continuing responsibility and review are assigned.
Question: Who maintains the records and value, and when must the decision be reviewed?
Evidence: Record keeper, valuation/financial review responsibilities, next scheduled review and event triggers are named and connected to the Playbook and annual/quarterly rhythm.
Review the milestone-specific 0–3 score and evidence test
0 (Not Started). No supported long-term participation decision or review of existing promises has been made.
1 (Learning). You can explain long-term participation, the difference between grants, vesting and payment, and why sale, no-sale and departure terms matter. A company-specific supported decision has not been prepared.
2 (In Progress). Substantive design or review is underway, but one or more of the seven requirements remains incomplete, including any unresolved decision, essential terms, financial support or actual adoption.
3 (Installed). All seven requirements are met: the company has adopted and reviewed a supported long-term participation arrangement, or a supported decision not to make a new grant, while administering all existing obligations and assigning continuing responsibility and review.
Verification test: inspect the actual authorized decision, professional and financial support, and dated review of the current position. For an award, trace one participant’s grant, vesting, valuation and payment scenarios, and account for all outstanding awards. For no new grant, explain the supported rationale, existing commitments, alternative approach and reconsideration trigger. Reading a draft or speaking confidently is insufficient.
Use suitable existing work. Record each requirement as complete, incomplete or not reviewed, with its evidence and date. You choose the saved score; keep owner, peer, coach and AI assessments separate. Unreviewed evidence is not automatically zero. Preserve prior reviews and identify the next action, responsible person and review date.
Keep the position current
Keep governing documents and protected participant records in The Numbers / Executive Compensation. Link the financial support and leadership work. Preserve each grant’s history and the dated decisions in The Rhythm.
Review on the agreed schedule and when staffing, ownership, value or funding assumptions change. Quarterly and annual reviews can consider new decisions while preserving existing terms. There is no required automatic annual grant.
Module 9 considers the actual change in your role. A compensation plan can support it; the plan alone does not prove the business can operate without you.
Explore long-term participation
- 495. How to Share Your Company’s Upside Without Giving Away Equity, with Ryan and Kim: connect ownership goals and meaningful participation. The older recording’s value illustration and “costs nothing” language do not establish an adopted grant or financial cost; use the current written distinctions above.
- 336. How to Create the Best Executive Compensation Plan, with Craig Rutledge: consider long-term participation as part of the whole compensation relationship.
- Phantom Stock and Grant, Vesting and Payment: understand the promise and the separate events.
Choose your next step
Review the wider system. Use the Ownership Assessment to consider this capability alongside your goals, numbers and leadership work. Choose a useful priority from the evidence.
Bring the plan together with support. The 90-Day Boardroom Blueprint connects ownership direction, the financial foundation and decisions in a first usable Playbook. You can explore support directly.
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