Long-Term Incentive (LTI) Plan

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A Long-Term Incentive (LTI) Plan is a work incentive plan associated to long-term organizational performance.



References

2018a

2018b

  • https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/long-diversificationtrend.aspx
    • QUOTE: Historically, stock options were the LTI vehicle of choice, used by nearly all companies offering long-term incentives. However, the use of stock options has declined significantly over the past three years, with only 59 percent of companies now offering options to employees. Accounting rules requiring companies to expense options, backdating scandals and declines in the stock market have had a dramatic impact on the use of options and other types of LTI awards. As the use of stock options continues to fall, the prevalence of other types of LTI plans is rising. Restricted stock (51 percent), performance-based LTIs (38 percent), stock appreciation rights (11 percent), and phantom stock (8 percent) are all gaining ground on stock options.

Table 1.

Percent of Companies Offering LTI & Equity Compensation Plans

Type of

Long-Term Incentive / Equity Plan

Percent of Companies

Offering

Stock Option Plan

59%

Non-Qualified Stock Options (NQSOs)

44%

Incentive Stock Options (ISOs)

28%

Restricted Stock Plan

51%

Restricted Stock Shares (RSSs)

32%

Restricted Stock Units (RSUs)

22%

Performance-Based LTI Plans

38%

Performance Cash Awards

18%

Performance Share Awards

17%

Performance Units

5%

Other LTI and Equity Plans

Stock Purchase Plans (ESPPs / MSPPs)

15%

Stock Ownership Plans (ESOPs / KSOPs)

11%

Stock Appreciation Rights (SARs)

11%

Phantom Stock

8%

Unrestricted Stock Shares

2%

2017

  • http://www.investopedia.com/terms/l/long_term_incentive-plan.asp
    • QUOTE: A long-term incentive plan (LTIP) is a reward system designed to improve employees' long-term performance by providing rewards that may not be tied to the company's share price. In a typical LTIP, the employee, usually an executive, must fulfill various conditions or requirements to prove that he has contributed to increasing shareholder value. In some forms of LTIPs, recipients receive special capped options in addition to stock.
      Because every business should have a plan for long-term growth, many companies should also utilize an LTIP to encourage employees to reach those goals. When objectives in a company's growth plan match those of the company's LTIP, key employees know which performance factors to focus on for improving the business and earning more personal compensation. The incentive plan helps retain top talent in a highly competitive work environment as the business continues evolving in predetermined, potentially lucrative directions.

      One type of LTIP is a 401(k) retirement plan. …
      Stock options are another type of LTIP. …

1993

  • (Kohn, 1993) ⇒ Alfie Kohn. (1992). “Why Incentive Plans Cannot Work.” In: September–October 1993 HBR Issue
    • QUOTE: … It is difficult to overstate the extent to which most managers and the people who advise them believe in the redemptive power of rewards. Certainly, the vast majority of U.S. corporations use some sort of program intended to motivate employees by tying compensation to one index of performance or another. But more striking is the rarely examined belief that people will do a better job if they have been promised some sort of incentive. This assumption and the practices associated with it are pervasive, but a growing collection of evidence supports an opposing view. According to numerous studies in laboratories, workplaces, classrooms, and other settings, rewards typically undermine the very processes they are intended to enhance.