The municipal utility board wants "something like stock options" for the general manager, but state law bars equity grants. What should the CHRO recommend as the long-term tool?
Select an answer to reveal the explanation.
Short Explanation
Cities cannot hand out stock, but they can still hand out a reason to stay. Think multi-year deferred money with strings, not a fake IPO. Copying Wall Street paper in a public utility is how a city gets a headline, not a retention tool.
Full Explanation
Public employers must translate private-sector equity tools into lawful long-term devices. Where state law bars stock options for a municipal utility general manager, a multi-year retention bonus or deferred-compensation arrangement with vesting and clawback terms can create a defensible hold without granting an ownership interest the city cannot create. Board-facing design includes eligibility, performance or tenure conditions, and sunshine-ready documentation.
Issuing phantom shares that mimic a private utility option plan without legal review invites ultra vires and disclosure risk and may still be barred depending on enabling authority. Paying a large unrestricted cash bonus this year and calling it equity equivalence fails the long-term retention purpose—it is a short-term dump without vesting glue. Declining any long-term device because "public employers cannot retain executives" is strategy abdication; legality constrains the form, not the need for a retention tool.
Exam caveat: deferred compensation and retention bonuses must still clear ethics, charter, and deferred-comp plan rules; clawbacks should be drafted with counsel, not copied from a tech offer letter. Operational check: present the board a written long-term vehicle with vesting schedule, clawback triggers, and counsel sign-off before appointment or renewal, and confirm it appears in the open-session compensation summary.