The perfume pyramid
I smell great.
I know this because my daughters have told me.
For Father's Day their present was a bottle of men's perfume, traditionally known as 'aftershave' or 'cologne'.
I have learned many things by being a father to which I can now add perfumery.
Did you know that musical terminology is used as a metaphor for how a fragrance comes together?
Nope, me neither.
Fragrance 'notes' are indicators and descriptors of individual smells in any perfume. These notes work together to create a unique scent, producing accords, similar to a musical composition.
All fragrances then have a perfume pyramid reflecting the fact that a fragrance doesn't smell the same throughout the day.
This is because you can't smell all of a fragrance's notes at any one time. Instead you smell different notes at different times depending on the life-cycle of the fragrance.
In order to visualise the life-cycle of a fragrance, a perfume pyramid is used to identify each phase of the life-cycle.
At the apex are the top-notes, followed by the heart notes and ending with the base notes.
Top-notes are short-lived but strong and sharp.
Heart notes are transitory notes that linger as the base notes become noticeable.
Base notes are the foundation that give the fragrance its staying power.
In case you are wondering (as I'm sure you are), the top notes for my new fragrance are: apple, lavender, bergamot.
The heart notes are: geranium, violet and jasmine.
The base notes are: vanilla, cardamom, sandalwood, pepper, patchouli and guaiac wood.
To my daughters, smelling great means I smell like warm apple pie in the middle of a forest…?!
The EMI pyramid
Exploring my olfactory faculties got me thinking about EMI options, as you do.
EMI share options (otherwise known as Enterprise Management Incentives) are the most versatile and popular way to get tax-efficient equity into the hands of employees.
Why so versatile and popular?
To answer this, indulge me as I examine the life-cycle of EMI options taking inspiration from the perfume pyramid.
Let's start with those EMI top notes - short-lived but strong and sharp.
Contribution, Reward, Incentive
Normally there is a pressing need to give someone an equity stake in the business.
Maybe a promise has been made or remains unfulfilled. A recruitment opportunity has arisen. Someone has signalled their intention to leave. A war for talent means doing nothing is not an option (pun intended).
As an owner, perhaps you feel morally obliged to give something back to staff after years of loyal service. Or perhaps you want to keep management's feet to the fire; exceptional performance should be exceptionally rewarded.
Finally, as part of succession planning you might believe that it is better to give something with a warm hand rather than with a cold one.
Design and Structure
As we transition to the lingering heart notes there should be a legal framework that is flexible and stable enough to deliver on the equity promise.
When should the equity be delivered? What conditions apply to earn it? What happens if someone leaves?
There needs to be certainty and clarity as to contractual terms.
From a design perspective, all good structures need an architect - a master perfumer - with the skill and experience to blend that perfect accord, balancing the commercial with the technical.
This is where the EMI expert comes in.
Tax, Value, Alignment, Wealth
Finally we arrive at the base notes. These are the main themes that give the EMI option its scent trail.
When you speak to people who have benefited from exercising their EMI options it is revealing what lingers.
Understandably nobody waxes lyrical about how great their EMI documentation was - the packaging.
What resonates is the tax efficient lump sum that was generated from selling their option shares, of benefiting from being aligned to the equity value of the business.
And in the right circumstances EMI can be a tremendous wealth facilitator, or at least go some way to paying off the mortgage. Invariably it is capital that makes you wealthy not income.
All of the notes and accords described above can be achieved successfully through EMI - it truly is the swiss army knife of equity incentives.
But I would go one step further.
A versatile fragrance is often referred to as a 'dumb reach', a no-brainer, something you reach for that is familiar, is a compliment getter, works in every situation - the one fragrance to rule them all.
Being a dumb reach does not make the fragrance boring, cheap or lacking class. Far from it.
The very essence of being versatile elevates the fragrance to a class of its own.
EMI is arguably in a class of its own. Its versatility makes it a luxury item worth exploring.
So whether you are an employer thinking about offering EMI or an employee on the verge of accepting, don't hesitate, EMI should be your dumb reach every time.
Oh, and if you already have EMI options, well done your employer for having expensive tastes.
Just like my daughters *gulp* (although I do smell nice).