Designing incentive compensation for key non-family executives

Many family businesses will reach a point where non-family executives are needed to manage the company and take it to the next level. There are myriad challenges to overcome in attracting outside talent to a family firm. Some executives are concerned about the uncertainty of family dynamics. Others are discouraged by what they see as the slim chance of a lucrative exit.

One of the biggest hurdles for family businesses is the need to develop an attractive long-term incentive (LTI) plan that recognizes enterprise value created over time and is competitive with plans offered by public companies and private equity–owned businesses. There are several ways to offset the inability to offer publicly traded stock or stock options.

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