Most publicly-traded issuers are interested in ideas that could help increase the life expectancy of the share reserve under its stockholder-approved equity incentive plan. The purpose of this “Tip of the Week” is to discuss the use of “inducement grants” as one of the many ideas to consider.
If you look at an equity incentive plan’s annual life cycle on a per-key employee basis, it is likely that the largest share grant occurred at the time the key employee was hired. That conclusion makes sense because more shares are generally granted at the time of the key employee’s hire in order to induce him or her to become employed with the issuer (compared to the number of shares it takes on an annual basis thereafter to retain that same key employee). With this point in mind, issuers could increase the life expectancy of its equity incentive plan’s share reserve if new hires received equity grants that were “outside” of the stockholder-approved equity incentive plan.
Continue Reading Tip of the Week: Use Inducement Grants to Protect an Equity Plan’s Share Reserve