Ghost stock options. The potential negative that exist with this type of plan are (1) the employee knows that they are not getting an actual ownership stake in the company, (2) the compensation leads to ordinary income, whereas it could lead to capital gain if true stock options were provided, and (3) an agreement regarding actual shareholder.

Ghost stock options

What are stock options?

Ghost stock options. The potential negative that exist with this type of plan are (1) the employee knows that they are not getting an actual ownership stake in the company, (2) the compensation leads to ordinary income, whereas it could lead to capital gain if true stock options were provided, and (3) an agreement regarding actual shareholder.

Ghost stock options


A phantom stock plan is an employee benefit plan that gives selected employees senior management many of the benefits of stock ownership without actually giving them any company stock.

This is sometimes referred to as shadow stock. Rather than getting physical stock, the employee receives pretend stock. Even though it's not real, the phantom stock follows the price movement of the company's actual stock, paying out any resulting profits. After a period of time, the cash value of the phantom stock is distributed to the participating employees.

Phantom stock, also known as synthetic equity, has no inherent requirements or restrictions regarding its use, allowing the organization to use it however it chooses. Phantom stock can also be changed at the leadership's discretion. Some organizations may use phantom stock as an incentive to upper management. Phantom stock ties a financial gain directly to a company performance metric.

It can also be used selectively as a reward or a bonus to employees who meet certain criteria. Phantom stock can be provided to every employee, either in as an across-the-board benefit or varied depending on performance, seniority or other factors. Phantom stock also provides organizations with certain restrictions in place to provide incentive tied to stock value. This can apply to a limited liability corporation LLC , a sole proprietor or S-companies restricted by the owner rule.

Stock appreciation rights are a form of phantom stock-based program, most commonly made available to upper management, and it can function as part of a retirement plan.

It provides increased incentives as the value of the company increases. This can also help ensure employee retention, especially in times of internal volatility, such as an ownership change or a personal emergency. It provides a level of reassurance to employees, since phantom stock programs are generally backed in cash. This can, in turn, result in higher selling prices for a business if a perspective buyer sees the upper management team as stable.

Phantom stock qualifies as a deferred compensation plan. The plan must be properly vetted by an attorney, with all of the pertinent details specified in writing. Dictionary Term Of The Day. A conflict of interest inherent in any relationship where one party is expected to Broker Reviews Find the best broker for your trading or investing needs See Reviews.

Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. Phantom Stock Plan Share. What is a 'Phantom Stock Plan' A phantom stock plan is an employee benefit plan that gives selected employees senior management many of the benefits of stock ownership without actually giving them any company stock.

Using Phantom Stock as an Organizational Benefit Some organizations may use phantom stock as an incentive to upper management. Stock Appreciation Rights Stock appreciation rights are a form of phantom stock-based program, most commonly made available to upper management, and it can function as part of a retirement plan.

Get Free Newsletters Newsletters.


More...

1344 1345 1346 1347 1348