He says deferred comp and profit-sharing plans are becoming increasingly complex, but cautions that s not the way to go. My advice is to keep it simple. Some of the best plans now have accelerating profit participation above a set percent of return on capital. For managers with functional responsibility, like a V.P. of construction, you ought to tie most of the bonus and deferred comp to the performance of the department in question, with a kicker tied to profitability of the entire organization. If you allow that to happen, you ll lose that manager.
Public companies can offer stock options to targeted managers.
But there are ways a private builder can compete with those options, even when the stocks do well. You just do two tiers of stock, the second without voting rights. The stock option is on second-tier stock. California consultant Doug Wilson cautions against offering stock options in the first few years of a new company. After a couple of years, I d start to reward my top two or three managers for seniority.