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S-8 Incentive Compensation
Small public companies need to conserve cash to fuel their growth; they tend to avoid compensation programs that involve significant cash payments. Equity compensation (e.g., stock options, stock-based grants) allows up and coming businesses to offer employees and other key constituents powerful financial incentives without using cash. Stock based reparation arrangements thus represent key ingredients of the compensation strategies of emerging companies. Learn about one of the most widely used award programs in this information packed 3-page white paper. The Merits and Drawbacks of a Stock Incentive Compensation Plan: S-8 Stock High Growth companies need to conserve cash to fuel their growth; they tend to avoid compensation programs that involve significant cash payments. Equity compensation (e.g., stock options, stock-based grants) allows up and coming businesses to offer employees and other key constituents powerful financial incentives without using cash. In addition, the company may transfer substantial economic benefits to employees, directors, consultants, vendors, etc., using stock or stock options, with a minimal impact on the company’s earnings. From the recipient’s perspective, stock based compensation offers an opportunity to participate in the company’s success (i.e., through appreciation in the value of the shares) without risk of capital loss. Stock option programs can also be structured to defer an individual’s recognition of income and allow taxation at capital gain rates. Stock based reparation arrangements thus represent key ingredients of the compensation strategies of emerging companies. A powerful tool for many Companies in attracting key employees and consultants is participation in employee benefit programs. Regulation S-8 (hereafter referred to as “S-8) provides an Issuer with a means to register securities issued to its employees, consultants or advisors. One of the primary benefits of Registration on Form S-8 is that the registration statement is effective upon filing. As such, these shares may be issued without a restrictive legend and are immediately marketable. However, S-8 securities may only be issued as compensation or as an incentive to individuals who provide services that do not involve capital raising transactions or market making activities. Advantages and disadvantages of S-8 Security Issuances Despite the April, 1999 amendments, Regulation S-8 can still be effectively utilized by an Issuer. However, Form S-8 has its advantages and disadvantages. [continued...] Want to know more? Download the White Paper "S-8 Incentive Compensation" for just $9.95. |
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