Posted by: Debra Andrews
Date: February 6, 2009

In the second part of our series of family business research studies, we looked at an article from the University of Massachusetts at Amherst: http://www.umass.edu/fambiz/articles/nonfamily_managers/three_problems.html

“Three Problems Facing Family Businesses: Recruiting, Retaining, and Rewarding Key ‘Outsiders’”
Family businesses “face a competitive disadvantage compared with firms that offer stock options and stock ownership.”

• Two options in the article are Deferred Compensation Plans and Phantom Stock Options
• Deferred Compensation Plans basically defer payment of income to an employee until they retire, when they have a lower tax bracket.
• Phantom Stock Options “refers to the fact that the options granted to key people are not based on actual stock shares. They are actually only rights to the appreciation in value of a certain number of shares of the employer’s stock over a designated time period. Thus they allow the participant to profit from the company’s growing value, without actually owning or controlling shares of stock.”

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