Compensation Plan Design
Challenge
A leading independent energy and commodities focused private equity firm, with over $7 billion of invested and committed capital, recently solicited consultation from the McLagan Private Equity team.
As a recent spinout of a captive parent organization, the firm was concerned with its ability to continue to attract, retain, and motivate employees in critical roles across the organization.
Solution
What followed was a comprehensive advisory, benchmarking and compensation plan design mandate. As part of this mandate, McLagan conducted management interviews with key stakeholders across the private equity business in order to understand the job responsibilities, organizational structure and overall business model.
McLagan also assisted with benchmarking and provided recommendations for annual cash compensation levels (including base salary and annual incentives) as well as carried interest economic sharing against competitive market practices to ensure overall competitiveness.
In addition, McLagan designed a unique phantom carried interest program to reward employees for work on legacy funds.
Results
The information presented to the client represented directly comparable and relevant information to the client's business and competitors. The recommendations were subsequently implemented by the client on a go-forward basis, ensuring a best in class organization, increasing transparency to key professionals, and guaranteeing alignment of interest with the firm’s Limited Partners.
