Advanced Markets 2025 On Demand: Phantom Stock Plans: Designing Effective Incentive Strategies for Private Companies

Phantom stock plans offer private companies a powerful tool to attract, retain, and reward key executives without diluting ownership—but designing these plans effectively requires careful structuring. This session explores the different phantom stock and synthetic equity plans, how they work and how each pan can be designed to accomplish the client’s objectives. The session will cover the key aspects of Full Value Unit (FVU) and Stock Appreciation Rights (SAR) plan, how the awards are granted over time and how to analyze the desired financial benefit for the employee(s). It will also cover how life insurance can play a crucial role in funding and managing the liabilities associated with phantom stock arrangements to provide liquidity for future payouts, mitigate financial risk and enhance plan sustainability. Through real-world examples, we will examine how to structure these long-term incentive plans (LTIP), review key tax and accounting considerations and define implementation strategies to help business owners create compelling, LTIPs that align executives with company growth.

By the end of this session learners will be able to:

• Identify the key features and types of phantom stock and synthetic equity plans, including Full Value Unit (FVU) and Stock Appreciation Rights (SAR) plans.

• Explain how phantom stock awards are granted and structured over time to meet specific client objectives.

• Analyze the financial benefits and liabilities associated with phantom stock plans from both the company’s and employee’s perspectives.

• Describe how life insurance can be utilized to fund phantom stock liabilities and improve plan sustainability.

• Evaluate tax and accounting considerations relevant to phantom stock and synthetic equity plans.

• Develop implementation strategies to design and execute long-term incentive plans that align executives’ interests with company growth and retention goals.