Every CEO/business owner wants his or her company to grow and become more profitable. For this to happen, a company must have the dedication and support of its key employees.
To increase loyalty and retention, key employees need to see and feel that they are making a significant contribution toward the organization becoming a larger and more profitable entity.
How can a CEO/owner accomplish this?
Offering a long-term profit sharing solution creates a tangible reward for executives that is tied to the success and vision of the company. The most effective long-term solution will vary based on the corporate structure of the company.
- Private company – CEO/owner has concerns about dilution of their stock ownership – Offer performance unit plans or phantom stock arrangements to avoid dilution
- Public company – a common solution will involve equity participation – Offer stock options, restricted stock or performance shares
A solution that will often fit the needs of public and private companies is a performance-based deferred compensation arrangement since these arrangements can drive long-term results and retention.
Why Offer Performance Based Deferred Compensation?
Benefit to Employers
- Able to offer to select individuals
- Align key employee interests with the long-term success of the company
- Provide strong retention incentives
- No dilution of company ownership
Benefit to Employees
- Help to fill the gap between what is provided by a qualified plan and what is needed in retirement
- Retirement income is accumulated without current taxation
- Offers reward and recognition for achieved results
- Long-term capital accumulation program
The incentives should be based upon goal achievement. If there is no goal achieved, there is no value to share.
Each company must determine which plan or combination of plan best suit the company while offering the greatest motivation to the company’s executive workforce.
Planning for a nonqualified executive compensation plan requires a deliberate and carefully devised game plan. Limitations of qualified plans present many challenges to highly compensated executives, most of which can be addressed with nonqualified plans Nonqualified plans complement qualified plans to serve as comprehensive financial planning vehicles.
As a greater percentage of the American population moves towards retirement, nonqualified plans may become more valuable for retirement planning. Implementing nonqualified plans help empower executives to plan and to save for retirement.
Nolan Financial has designed and implemented nonqualified plans for all types of organizations, including for-profit and non-profit. If you have any questions or interest in regards to designing, funding or administering a nonqualified plan, please contact:
Michael E. Nolan
President and CEO
Email – firstname.lastname@example.org
William A. Craig
Senior V.P. Business Development
Email – email@example.com
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