Chief Executive'S Extraordinary Circular - Dorset: Fill & Download for Free

Building on the other great responses here which primarily address how to divide up the equity, I want to add my thoughts from a legal perspective.When granting equity to the C-level folks, assuming you have incorporated the company, the following are the key things you should button up from a legal perspective:Vesting: As is important when granting equity/options to any member of the team, you always want to make sure the grants are subject to vesting. For your C-level team, you will likely grant equity in the form of restricted stock as opposed to options. Why should you issue equity subject to vesting? Simply because vesting protects the company in a couple of ways: (a) it makes sure that key team members stay with the company for a certain period of time in order to earn the full amount of their equity grant and (b) if someone does leave the company before their equity vests, unvested equity typically revert back to the company (and be available to be used for others who join the team to replace the person who left). One additional thing to bear in mind is that when granting equity subject to vesting, the recipient should check with their accountant and make an 83(b) election if appropriate to avoid unintended adverse tax consequences.Although there are various ways to structure vesting, the most common approach is to have equity vest over a four-year period with a one-year cliff and monthly vesting thereafter. More on this here: Nait Patel's answer to What does "4 years vesting with 1 year cliff" mean?IP Assignment: It is not uncommon for team members to do work and create work product (e.g. designs, code, etc.) that is valuable to the company. Therefore, it is crucial that as part of receiving equity grants, all team members assign all the IP that is important to the business, to the company. Failing to do so at the onset could result in disputes down the road as to what IP is property of the company and what belongs to a particular individual.Roles, Rights and Responsibilities: When you have more than one founder or key people in a company, in addition to the equity splits and IP assignments, it is crucial to discuss and agree on each person’s rights, duties and responsibilities, capital or asset contributions, removal process and requirements at the onset. Once you reach an agreement on these items, the agreed terms should then documented.In addition, it is equally important to have proper documents in place that govern the business and owners financial and managerial rights and duties. For an LLC, this document is typically referred to as an LLC Operating Agreement (single-member, multi-member or manager-managed). For a c-corporation, this document is typically referred to as the Bylaws.Lastly, when it comes to incentivizing other team members with equity, the typical way this is achieved is through an equity incentive plan. The common approach is to create an option pool that will be reserved for such option grants. From a legal perspective, this requires setting up an equity incentive plan and related grant documentation. To learn more about this, here is a resource that may help: Top 12 Considerations for Your Startup Stock Option Plan - Should I Sign

The "bullshit" is piled so high it's amazing these people don't drown in it. They are the very same people that whine about raising the minimum wage for a "working" American to $10.00 an hour while they dish out salaries on others just because..............................??????????????Here's a few examples of the absurd compensation awarded individuals who are not much different than you or I but happen to have CEO after their name.At the top of the charts we findOracle chief executive Larry Ellison, who pulled down $78.4 million; ($25,000.00 an hour)Bob Iger at Disney, who made $34.3 million; ($11,025.00 an hour)and Rupert Murdoch at Fox, who received $26.1 million. ($8,365.00 an hour)Time to rein in grossly overpaid CEOs | Al Jazeera AmericaCorporate America’s well-oiled compensation machine is running like a dream.Browse the proxy statements of the nation’s largest corporations and you’ll find the instruction manuals for this apparatus explaining how to finely calibrate the pay of top executives with company performance.The Coca-Cola board, for example, lays out the formula that set the 2013 cash bonus for Muhtar Kent, its chief executive (base salary x base salary factor x business performance factor). It explains how a failure to achieve certain goals helped limit the bonus to $2 million, but also describes how Mr. Kent got millions more in stock and options. It notes that under his leadership, Coke had “continued to gain value share globally in nonalcoholic ready-to-drink beverages,” and tells shareholders why the board might require him to fly on the company jet (“to allow travel time to be used productively for the Company”). What was all that worth? A tidy $18 million.At this point, most people have become used to hearing about these bloated pay packages at the top. We’re also used to hearing the rationale from these folks and their boosters about how they are paid what they are worth.To the contrary, they are grossly overpaid. First, many CEOs were running large successful companies in the 1960s and 1970s for pay that in today’s dollars averaged about one-tenth as much as the current crop of CEOs get. We can also look to Europe, Japan and China and find plenty of successful CEOs of large companies who work for a small fraction of the price of American executives. And there are plenty of CEOs who get these outlandish pay packages even when they drive their companies into the ground.The relevant question is not how much a CEO contributes to the company. That is not how economics works. After all, how much does the firefighter contribute who rescues three kids from a burning house? We don’t pay our hero firefighters multimillion dollar salaries. We pay firefighters on the basis of how much it costs to hire another firefighter who can also do the job.The question is how much does the CEO contribute compared with the next person in line for the job? Given the experience of large corporations in other countries, there is every reason to believe that there are lots of next people who could do the job as well or better and for much less. (Anyone who believes that CEO pay actually reflects the CEO’s value to the company should read Lucien Bebchuk’s outstanding book, Pay Without Performance.)The problem here is grounded in the corruption of the corporate governance structure. In principle, CEOs should be treated like any other employee. Companies should ask if they can get away with paying them less or getting a lower-cost CEO of the same caliber in Germany or China.

The average tenure of a CEO is less than 3 years. Why is that? To get CEOs set up for success, you need to measure, manage and accelerate performance.There are three key strategies to accelerate CEO performance and be transparent:1. Develop Agreed Upon Measures of Success:Challenge: There are no well-established measures of success for CEOs. And, it’s not just about the numbers.Solution: Develop tailored measures of success. E.g., (1) Leadership; (2) Strategy; (3) People Management; (4) Operating Metrics; and (5) External Relationships (See article reference)2. Manage Performance:Challenge: Most CEOs don’t have performance reviews.Solution: Develop tailored performance management approaches. E.g., board members gather feedback from internal and external stakeholders on your strengths and opportunities for improvement (See article reference)3. Develop 90-day action plans:Challenge: Most CEOs don’t have a 90-day action plan to build on strengths and address opportunities for improvementSolution: Develop 90-day action plans. E.g., (1) Intentionality; (2) Awareness; (3) Self-Esteem; (4) Reflection; (5) Discipline; (6) Environment and Peer group; (7) Develop strategies in all areas of your life; (8) Learn from Pain; (9) Character growth; (10) Set best fit goals; (11) Let go of the past; (12) Curiosity; (13) Next-step mentors; (14) Daily effectiveness; (15) Put others first