Equity Compensation in Private vs. Public Companies: Key Differences for Execs

Authored by FW Cook's Lauren Spencer and Jin Fu for Pave. 

Equity compensation for executives is an important tool for rewarding long-term performance and alignment with shareholder interests. Differences between public and private company equity program design are primarily due to differences in company risk profile and stage of growth. Equity for private companies emphasizes future potential value and rewarding high growth, while public companies have a greater focus on more stability and sustained performance.

‍This article explores three key differences in executive equity compensation practices between private and public companies: equity vehicles, equity denomination, and equity grant frequency. This analysis focuses on private companies that intend to go public or pursue a strategic sale, rather than those that plan to remain private indefinitely.

Let’s dive in.

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Lauren Spencer
Consultant

Lauren Spencer consults on executive and board compensation, with a primary focus on market research for clients across a range of industries and growth stages. Her work spans total compensation design, peer group analysis, incentive program development, corporate governance, and pay-for-performance evaluations.

Jin Fu
Managing Director

Jin Fu consults across a diverse range of industries and stages of growth, from pre-IPO to S&P 500 companies. She has experience on all aspects of executive compensation strategy and design, including short- and long-term incentive plans, equity compensation, corporate governance, and corporate transactions, including preparation for initial public offerings.