Equity Incentives at Publicly Traded vs. Private Equity Owned Companies : Is There a Difference?

Equity compensation for senior management of private equity owned companies is very different than that of publicly traded companies. While both types of companies share a common principle of rewarding management based on an increase in shareholder value, fundamental differences in the investors and their potential holding periods drive divergent equity compensation practices. This article refers to the different equity compensation models as the “Private Equity Model” (for example, concentrated financial driven owners with a generally approximately five year time horizon) and the “Publicly Traded Model” (for example, broad and diverse owners driven by financial gain over an indefinite time horizon) in explaining their differences