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Can a part-time CFO expect equity on top of hourly rate for services?

Asked on Feb. 8, 2016

I enjoyed the discussion on determining an appropriate hourly rate for part-time CFO services, and found it very useful. Thanks to all of you that provided feedback. I pose a new challenge. I am preparing quarterly financial statements for a microcap OTC Pink company. Given the client's financial situation, I am reluctant to charge any higher on my hourly rate. I would like to propose receiving stock or stock options, given the growth potential of this company. In accordance with Article IV of the AICPA Code of Professional Conduct, since not obligated to being independent, it appears that receiving stock is an appropriate form of compensation. I would appreciate any recommendations and shared experience. Thanks.

Answers

EMERSON GALFO's headshot
EMERSON GALFO CFO • February 6, 2016

I would base it on the anticipated relationship or absence thereof...

1, Just cover the difference between what your market rates are and what you actually charge them. Base the stock value to last available value date prior to "billing" to determine number of stocks. Note: that the "last available value date" can be a + or a - to you.

2. Set an agreed upon number of stock to be issued to you at certain points of the engagement. Maybe with "vesting" acceleration if and when you decide to come on board full time. Making sure that this engagement tranche would be treated separately from your employment tranche package.

Number 1 is more quid pro quo.
Number 2 is more building up to a full time position.

I am sure other options will be recommended by other members.

EMERSON GALFO's headshot
EMERSON GALFO CFO • February 6, 2016

As a P.S., I just re-read your title and the answer is NO, you cannot EXPECT stocks on top of your per hour compensation. You can ask and/or negotiate (in this case your are charging below your market rate) for it, but not EXPECT it.

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