Executive Mega Grants: Navigating Pitfalls in Design, Valuation, and Accounting

A mega grant is what the name implies: an equity award that’s extraordinarily large, and notably one-time rather than recurring. Mega grants strongly align incentives at a time when win-win incentives are critical and aggressive shareholder value creation is necessary. They also provide powerful retention hooks for executives via high realizable pay over a long period.

But there’s a reason mega grants are only used in exceptional cases. They’re viewed very negatively by shareholder advisor groups, they involve putting many eggs in one basket with limited ability to adjust later, the costs can be high, and the administration and accounting can be tricky.

In this issue brief, we cover some of the key pitfalls that we’ve encountered in our years of experience with mega grants of all sorts.