We are pleased to share our Portfolio Company Equity Participation Plans Report, surveying more than 500 portfolio company executives and PE professionals worldwide to understand how management incentive equity is structured, perceived, and evolving across the private equity landscape.
The average management incentive pool has decreased by more than a full percentage point since 2020, now hovering around 9%, with the median skewing upward to just under 10%. We attribute this shift to outlier pools tied to outsized buy-in multiples during the 2020–2022 vintage years, many of which have since been reset to provide management a continued incentive. Beyond these resets, pool size has trended downward, accompanied by greater clarity and uniformity in the associated investment pool base case.
While we have seen a trend toward plan structures that are tax-favored, a majority of plan participants still sit in plans where incentive payouts are taxed as regular, earned income rather than capital gains. For sponsors utilizing tax-favored structures, this presents a meaningful differentiation opportunity in attracting and retaining top executive talent.
How management perceives equity awards and how sponsors perceive them represents another significant opportunity for differentiation. To the extent sponsors are able to demonstrate that base case valuations are grounded and achievable — rather than perceived as "pie in the sky" numbers — attracting and retaining key talent may prove considerably easier. Bridging this perception gap is a critical lever in the competition for portfolio company leadership.
About Vardis: Vardis is a global executive and board search firm dedicated to serving private equity and growth equity firms and their portfolio companies. Our compensation surveys and original research are fundamental to our core recruiting process.