Private company valuations are invented out of whole cloth by the board for lots of reasons, almost none of which are an accurate reflection of the actual growth of the company. Same for profit sharing - profit is an entirely invented number. It doesn't really solve the problem of options being too easy to fiddle and too hard to cash in.

I get the tax advantages of this, though. But I expect if it became common the taxman would want their cut of the nominal growth in value each year, or something. Bastards.