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Do incentive-pay practices differ between publicly traded and privately held companies? If so, how? Research released this year by WorldatWork, Deloitte Consulting and Vivient Consulting set out to answer these questions.
Incentive-pay practices do differ between public and private companies. Short-term incentives (STIs), including annual incentive plans, are structured similarly across both organizational types. However, public companies are much more likely than their private counterparts to offer STIs to the broader employee population. In contrast, private companies place greater emphasis on STIs in their total rewards programs, as STIs are the companies’ most effective compensation tool for attracting and retaining talent. However, private companies tend to reserve short-term rewards for exempt employees and above.
On the long-term side, publicly traded companies rely heavily on long-term incentives (LTIs), such as restricted stock and stock options. Restricted stock has surpassed stock options as the LTI vehicle of choice for public companies. In contrast, private companies favor cash LTI plans, such as bonus plans with goals and payouts tied to multiyear performance, over real equity. Public companies are more likely to make broad-based equity grants to the larger employee population, while private companies concentrate LTI awards on top executives.