As the business world evolves, methods of compensating highly effective leaders are expanding beyond the base salary model. For women leaders, non-traditional forms of compensation provide not only recognition for their leadership but also the opportunity to create lasting wealth and to retain the alignment of their interests with those of the organization. These innovative methods of compensation, when paired with traditional compensation packages, can provide benefits to both business and their women leaders.
STOCK OPTIONS: FOSTERING OWNERSHIP AND MOTIVATION
Stock options are a compelling form of financial compensation for women leaders. This system of sharing equity with select employees gives companies, particularly relatively new companies, a means to attract, retain and motivate key employees. Stock options grant the right to purchase company shares at a set price after a certain period. By promoting stock options, businesses can encourage leaders to focus on the long-term success of the company. As the value of the business grows, so does the potential reward, making stock options a powerful motivator and a conduit between a woman leader’s performance and her personal financial gain. Companies can further incentivize women leaders by offering accelerated vesting schedules for achieving specific milestones, particularly those tied to organizational growth and strategic initiatives.
EQUITY INTERESTS: BUILDING LASTING WEALTH
Equity interests, including restricted stock units (RSUs) and direct share grants, can present another effective approach for incentivizing women leaders. Unlike stock options, RSUs and share grants can be structured to provide corporate ownership following the lapse of certain restrictions. Such restrictions can include performance goals, both individual and corporate, and continued employment. However, prior to the vesting of these options, the company can still permit the grant recipient various shareholder benefits. This form of compensation not only allows women leaders to participate in the company’s potential successes but also facilitates a greater sense of belonging and influence within the organization. Equity awards can be structured to support long-term engagement and may offer tax advantages, enhancing their appeal as part of a comprehensive financial package.
PHANTOM STOCK: REWARDING PERFORMANCE
For private companies where direct equity is not a feasible option, a phantom stock program can present an alternative method of rewarding a woman leader. These contractual agreements pay out a cash bonus equivalent to the value of a company’s shares, including appreciation and dividends, without diluting company ownership. For a high-performing woman leader, phantom stock results in a direct correlation between her financial future and the enterprise value she is helping to grow, ensuring she is not just working for the business’s owners, but increasing the value of the company along with them.
GOVERNANCE: SHAPING THE FUTURE
Compensation is not only about financial reward. It is also the recognition of one’s worth to the organization and the ability to develop a business. A profound way to acknowledge a woman leader’s status within an organization is to elevate her role to that of a shareholder with voting rights or to a seat on the company’s governing board. This transcends “management” and invites a woman leader to participate in the development of an organization’s strategy and vision. It validates her leadership and contribution to the organization. In addition, such an elevation alters a woman leader’s standing not only within the company but within the larger business community and industry.
CONCLUSION: RETHINKING FINANCIAL REWARDS FOR WOMEN LEADERS
Non-traditional compensation — whether economic in the form of stock options, equity interests, or phantom stock or non-economic in the form of governance — empowers women leaders to benefit from the value they help to create. By adopting these innovative approaches to compensation, companies can be in a position to not only attract and retain outstanding talent but also foster greater engagement, loyalty and long-term wealth accumulation for women in leadership roles.
For more information, contact MacDonald Illig Attorneys at 814/870-7600 or visit macdonaldillig.com.
Colleen R. Stumpf is a partner at MacDonald Illig Attorneys. As general counsel, she provides competent guidance to businesses as they address the various matters facing their business daily.
