Distribution Option Grants are option grants we give to existing partners. Historically, we have done this once a year since 2020 typically in Q1.

Principles

Partner re-up grants are intended to:
- Build partner ownership incentives
- Incentivise high performance
- Act as a retention mechanism
Therefore:
- As with bonuses, Heads of Departments should have control over how much an individual receives, up to the per-tier max.
- Re-ups carry standard 4-year vesting with a 1-year cliff, for retention.
- Partners who have been here less than 6-months (as of the vesting start date) aren’t eligible, as they just received their new-hire grant.
- Re-up grants are made based on forward looking Tiers (vs. bonuses, which are our mechanism for looking backwards), so if re-ups are happening shortly before a re-tiering or change in new-hire grants, the re-ups should use the new tiers & values.

Details

The per-tier max is set as a % of the new-hire grants for the period, based on ESOP availability.
- This way, we agree as a team on the balance of equity compensation by tier once and don’t need to litigate a different structure for re-ups.
- NB: This means existing partners at tiers which do not receive new-hire grants, will not receive re-ups. The incentive should instead be to receive a promotion to a tier that receives grants.
Availability is determined by:
- current availability in the pool (driven by partner buybacks, option cancellations, prior grants, performance ESOP expansions etc.)
- keeping 18-months of hiring plan in the pool
- accounting for the planned Bonus Option Swap, i.e. letting partner swap their cash bonus for options
- recognising outsized ESOP events may occur (e.g. bringing in very senior hires)
- Principle: We should not excessively front-load re-up grants. Doing multiple, smaller rounds of re-up grants per year is better for the company & the partnership.
  - Avoids us over-extending ourselves. (It’s much easier to get more cash than to get more ESOP.)
  - Doing a second round at, say, the 6-month mark is straight-forward.
Re-ups are not the same thing as “retention grants”, which are a yet-to-be-determined model of grants for our most under-equitized, highest performing partners. This proposal does not address retention grants - that’ll come later.