If he decided from the start that he wasn't going to take investors or go public, handing out stock would be incredibly misleading since there isn't any market

If he decided from the start that he wasn't going to take investors or go public, handing out stock would be incredibly misleading since there isn't any market to trade in or liquidity coming. In that case simply paying well and creating a good workplace, free of investor pressures, is exactly the right thing to do (I can't say if that is the case here).