Equity-based incentive programs are rarely introduced because they are cheap. They exist to attract, retain and align key people over time.

In equity and incentive programs, cost does not appear by accident. It reflects an intentional decision about how much value the company is prepared to share in exchange for commitment and performance. When that logic is not clear early on, cost often resurfaces late, at a point where decisions need to be defended rather than shaped.

The more relevant question is therefore not whether a program costs money, but whether the value being shared makes sense given what the company is trying to achieve.

When cost is high, it often reflects value being created

When an incentive program is well designed and fits the company, cost often becomes visible at the same time as results improve. This can feel uncomfortable when figures surface in reporting or board material, but it is usually a sign that value is being created and shared as intended.

This perspective assumes that the fundamentals are sound and that the program reflects the company’s ambitions and direction. When that is the case, cost is less a warning sign and more a natural outcome of something that is working.

Seen this way, cost is often a luxury problem. It tends to arise when things go well, while the alternative is rarely cheaper. The discussion then shifts from whether the program costs money to whether the value being created justifies the investment being made.

Questions decision makers should be ready for ahead of the AGM

As AGM season approaches, the most productive discussions are rarely about technical detail. They are about comfort and confidence.

Decision makers often return to similar questions: 

• Are we comfortable with the value being shared if the program works as intended? 
• Do we understand how that value supports retention and long-term focus? 
• What would it cost the company not to have an effective incentive program in place?

Having shared answers to these questions tends to make approval discussions more focused and constructive.

Putting incentive program cost into context

Cost in equity and incentive programs is not a failure of control. It is an expression of intent. It reflects how much value a company is prepared to share in order to achieve its goals.

Approaching cost as value rather than expense helps shift the discussion from short-term discomfort to long-term perspective. It gives decision makers clearer language for meetings and firmer footing when questions arise.

In the upcoming articles in this series, we will continue to explore what decision-makers should be aware of heading into AGM season.

If you’d like a second perspective before AGM discussions begin, book a meeting with us