EMI Options Are Belief Contracts

I have written and spoken before about EMI options as a form of belief contract. The equity compensation platform, Optio, recently picked up on the phrase following a podcast conversation I had with them about what makes employee equity work in practice. You can read and listen more here.

I know the phrase comes across as gimmicky, but I think it is actually a useful shorthand for something quite important: an option only really works as an incentive if the employee believes there is a credible path from what they do today to value they might one day realise.

Strictly speaking, the idea is wider than EMI. Almost every form of long-term equity asks an employee to believe something about the future. What differs is how much belief the incentive requires.