Instructors: Marc Hobak

This class is designed to teach operating professionals how to design and implement management incentive plans. Effective executive compensation is a key ingredient to PE portfolio company success. Compensation plans must provide just enough expected value of pay to attract and retain the talent needed to realize the investment thesis or value creation plan. Companies can lose out by either underpaying or overpaying. More importantly, effective compensation plans drive success by effectively aligning management and owners’ interests with variable pay that drives value creating behavior and is robust to shifts in the business landscape over the holding period.

In this program, we cover what operating partners need to know to effectively design and manage compensation plans, including:

• Understanding the elements of executive compensation and how each element contributes to the key objectives of retention and alignment

• Allocating equity, including evaluating the costs versus the benefits of dilution

• Designing incentive plans that drive value creation and avoiding common pitfalls in plan design that make them overly complicated and undermine their effectiveness, including:

○ Cash bonus plans
○ Equity-based incentives
○ Setting performance targets
○ Goal ranges and incentive leverage
○ Effective trade-offs between compensation risk, pay competitiveness, and alignment.

• Establishing effective oversight of executive compensation, clearly distinguishing the roles of management and the Board/Compensation Committee in developing pay programs, including the cadence for making compensation decisions each year and over life of the investment.

Operating professionals will leave this class feeling with the skills needed to design effective incentive plans.