Second, understand that being small brings real advantages. Without an entrenched personnel bureaucracy and long-standing compensation policies, creativity and flexibility are at a premium. Above all, be thorough and systematic about analyzing the options. Startups should evaluate compensation and benefits choices from four different perspectives. In almost every case, equity becomes the great compensation equalizer - the bridge between an executive's market value and the company's cash constraints.
Startups have to decide whether to share equity, and whether to offer restricted stock or options.
Choosing compensation policies for startups means making tough choices and setting strict limits. There is an inevitable temptation, as a company shows signs of growth and stability, to enlarge salaries and benefits. These temptations should be resisted. The wisest approach is to go slow and make enhancements incrementally. Reprint 89111 Harvard Business Review Article.