Ownership-based compensation awarded to executives in the form of stock options, restricted stock units (RSUs), performance shares, or other equity instruments that align executive interests with shareholder value.
Equity compensation is a defining feature of executive pay, particularly in technology and venture-backed companies where equity can represent 50-70% of total compensation value. Common equity instruments include stock options (the right to purchase shares at a predetermined price), restricted stock units (RSUs that vest over time), performance shares (equity that vests based on achieving specific business metrics), and carried interest (in private equity). Vesting schedules typically span 3-4 years with a one-year cliff to encourage retention. Equity compensation creates alignment between executive and shareholder interests but adds complexity to recruiting — candidates must evaluate current equity holdings, unvested equity forfeitures, and the potential value of proposed grants. Executive recruiters help bridge compensation expectations by modeling total compensation scenarios across different equity structures and exit assumptions.
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