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EXECUTIVE COMPENSATION AND PLANNING


Executive Compensation has four distinct characteristics:

  1. Pay Package Design: salary, annual incentives, long-term incentives, benefits, perquisites and severance or change-in-control agreements.
  2. Equity Compensation:  stock options, restricted stock, restricted stock units (RSUs) and performance shares.
  3. Performance-Contingent Pay:  the company must achieve pre-established criteria of specific financial results and/or strategic objectives.
  4. Vesting Schedules:  full ownership of the equity award is often conditioned on the executive’s compliance with certain covenants.

 

Planning

Great!! You have been fortunate enough to secure this excellent compensation package from your employer.  Now what do you do?  Unfortunately, for many executives they stand by and do nothing.  They do not take the time to create their own plan to best maximize the benefits that have been provided to them.

At Gwynedd, we have encountered too many successful executives that have had the unfortunate experience of helplessly standing by paralyzed while witnessing incredible paper gains in their vested stock options evaporate into thin air.   Sometimes this has resulted in millions of dollars in lost compensation simply because they failed to act in a timely fashion.  Most executives are too busy working and managing a family to closely monitor their numerous individual stock awards.  They don’t have the time to keep track of when the awards vest and at what price they are in the money.This was particularly true during the market crash of 2008-2009.  Billions of dollars in equity compensation vanished in a matter of months.  Some never to be regained again.  All of this could have been avoided had the executive created and followed a plan.

Gwynedd will create a plan for you that will help take the emotion out of what is an extremely important financial decision.  If you are planning on retiring within the next 5-10 years, and have equity compensation, it is imperative that you contact us.  The quality of your retirement is at stake.

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