They don’t always need more equity / options. Typically, most CEOs one way or another — as founders, or from their initial grant — have plenty of equity.
But incentives work. They work on all of us. Even Elon Musk.
Even if a CEO already has $50m in stock (!!), an option that can make her another $50m will incent her. Maybe it shouldn’t. Maybe just growing the company to make that initial $50m (!!) stake should be enough of an incentive.
But we all clearly gravitate toward the goals that align to variable comp.
So another stock option grant that say vests over a longer-time horizon (e.g., the next 10 years), or that is tied to crazy goals (like building a trillion dollar company at Tesla) … those incentives do work. The CEO will focus on staying longer, and building more enterprise value. It works.
And conversely, a lack of incentives sometimes produces a “best efforts” mentality over a “take the hill and hit the goal” mentality.
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