With options, an employee can dream of making millions if the company becomes successful, but with most typical cash bonus/profit sharing there is no chance of

With options, an employee can dream of making millions if the company becomes successful, but with most typical cash bonus/profit sharing there is no chance of that. The idea is that these mega cash-outs even if not very likely are more motivating than more modest size, but guaranteed bonuses. Even if you were to structure a bonus/profit sharing plan such that employees could make millions, then you run the risk of key employees making a bundle of money and then leaving for the next opportunity. With options, by the time it is clear the employee will make millions from the options they almost certainly do not have enough cash to deal with the tax implications of exercising (unless there is a secondary market) and will be unlikely to leave until the company reaches a liquidity event (which is good for the company).