Equity Compensation and the Japanese Art of Sumi-e
The Japanese term “sumi-e” means black ink, the “e’ refers to painting. This is one of the most iconic forms of art in Japan. Simple ink on handmade paper. The goal is to communicate as much as possible with as few strokes as possible. Each stroke is critical. Each is also final. You must fully envision your finished piece before you begin to paint. Then you must trust each action and paint with confidence. It is not easy to master. The masters are few and far between. Equity compensation requires much of the same preparation, confidence, and custom made tools.
In perfect circumstances, Sumi-e is incredibly difficult. There is no second-guessing. Even the slightest timidity is reflected in the final product. This may be one reason we have never heard of one of these paintings being made in the open bed of a pickup truck that is bouncing along an unpaved country road. Unfortunately, unlike the Sumi-e master, compensation professionals do not get to wait for the perfect conditions.
The Dow Jones Industrial Average is currently down more than 30% from its all-time high. And, it’s all-time high was barely more than a month ago. On several days in the past few weeks, we have seen drops that are more dramatic than virtually any day in the last 100 years. Obviously, this is not the ideal time to make equity compensation decisions. And yet, we must make decisions and take action if we are going to keep moving forward.
Luckily although our final product must be as simple and final as black-ink art, we are not bound to the same Zen-like approach to the rules of our art. This moment calls for the same confidence and bold decisions, but perhaps on a smaller scale. Instead of trying to get a perfect masterpiece completed, this may be good to practice painting basic lines. Instead of a huge painting, it may be time for a few smaller pieces.
Instead of trying to create a program that will work for the next several years, you may want to consider a few tweaks that will get you through the next few months. Instead of using all of the equity you have budgeted in Spring-time grants, consider granting equity on a quarterly basis for the rest of the year. Instead of using that cool new plan you paid some consultant tons of time and money to create, perhaps keep things simple for a while, at least until the dust settles.
The decisions you make now may still have an impact ten years from now. It is now obvious that only last year we could not have accurately predicted things ten months in advance. Give yourself a break and don’t hold yourself to accurately guessing the next ten years. Over the next several weeks many companies will need to make uncomfortable decisions regarding their equity compensation programs and the staff who benefits from them. Keeping those decisions smaller and simpler is a good way to look like a master in the future.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense and has three metaphors for every occasion. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, , “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.
