The executive compensation programs of the largest public companies often include the types of equity-based compensation such as stock options and performance shares as described in this chapter. Smaller nonpublic companies often have the same types of strategic goals and want to provide the same types of compensation plans as do the larger public companies but do not have the equity types of compensation to offer since the firms do not have publicly-traded stock.

Required:
1. What are the advantages of equity-based compensation such as stock options and performance shares?
2. What types of compensation can nonpublic companies’ offer that would provide the desired incentives that equity-based compensation offers?