Great companies all have one thing in common: great employees. At the end of the day, despite our constant advances in technology, business is still conducted by people. So it is important for companies to retain their top talent.
Employee retention can be achieved several ways, but one of the most popular and effective ways to reward long-term employees and attract and retain top-quality talent is to allow key employees to share in the growth of the company through a Stock Appreciation Rights (SAR) Plan. A SAR plan is a form of nonqualified deferred compensation plan. The value of the eventual payout is based upon the growth in value of a share of the company as measured over a period of time. This is advantageous because it allows new employees to share in future growth, which they help bring the company. The amount of payment is equal to the growth in value of the company from the SAR Grant Date until the date of a certain “Trigger Event,” such as death, disability or retirement, or the sale of the company, multiplied by the SAR Percentage, a percentage stated in the SAR agreement, and further multiplied by the employee’s vesting percentage in the SAR at the time of the Trigger Event.
All of this is possible without diluting the equity ownership in the company by its actual stockholders.
A carefully crafted SAR Plan can be a valuable addition to any closely-held businesses looking to attract and retain top talent. If you have questions about crafting a Stock Appreciation Rights (SAR) Plan, please contact Offit Kurman Business Law and Transactions attorney and chair of the firm’s Business Law and Transactions Practice Group Mike Mercurio at firstname.lastname@example.org. Mr. Mercurio regularly counsels clients on all aspects of Stock Appreciation Rights.
Offit Kurman Attorneys at Law: Business Law Practice Group
Offit Kurman Attorneys at Law is a dynamic legal services provider assisting clients throughout the mid-Atlantic region. The experienced and results-driven attorneys in our Business Law Practice Group handle the full range of legal issues that businesses face during their life cycle, bringing invaluable practical, real-world business knowledge and expertise to every matter they handle. We are effectively equipped to handle matters of all sizes and levels of complexity.
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