One of the first things you learn in economics is that incentives matter -- and that if you get the incentives wrong, the results can be, well, interesting. Exhibit A: the subprime mess.

In an interesting column in this weekend's Wall Street Journal, Herb Greenberg writes (subscription required) about Lululemon (NASDAQ: LULU), where the terms surrounding options grants put top executives in a position to serve the private equity backers rather than other minority shareholders who bought the shares during or after the IPO -- at a much higher price.

In the case of Lululemon, CEO Robert Meers saw some of his options vest based on when the private equity backers cashed out. According to Greenberg, "The vested amount would immediately leap to as much as 40% if private-equity investors sold; the actual amount was based on a sliding scale tied to how much they actually made."

Options that vest based on some sort of performance are great. But I'm skeptical of options that vest based on when private equity backers who paid a tiny fraction of what other investors paid for their stake in the company cash out.

I'm wary of companies taken public by private equity firms in general. The buyout shops are masters of the art of "buy cheap and sell dear," and "buying dear" tends to be a great way to lose money in the stock market.