We currently have a German legal trainee, Sonita Roth, working with our Incentives team at Burges Salmon. One of the pleasures of meeting overseas (trainee) lawyers is that you start comparing things you would not ordinarily think to compare.
Believe it or not, our conversation did not begin with share plans. We were talking more generally about the different economic traditions of Germany and the UK: ownership, participation, the relationship between employees and companies and where remuneration ends and investment begins.
Eventually - perhaps inevitably - we realised that we were really talking about employee equity. We were not quite at Hegelian levels of dialectic: thesis, antithesis, synthetic equity (lol). But the contrasts seemed worth exploring.
I had started with an instinct often encountered in UK incentives practice. If we want employees to participate in the value they help create, genuine equity feels like the natural destination. Options, growth shares, EMI, CSOP and similar arrangements are different legal routes through which we often seek to give employees exposure to equity value, sometimes culminating in ownership.
Virtual equity can then look like an approximation. Give the employee the economics of shares without actually giving them the shares.
Sonita, quite rightly, challenged that premise.
Why assume ownership is the thing we are trying to reproduce?
Perhaps the more useful starting point is to separate four things that equity incentive...
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