Long-Term Incentive (LTI) Plan

Context:
- It can (often) have a long-term amount (e.g. three years).
- It can (often) be payed out in incremental portions (e.g. annually).
- It can (often) be composed of:
  - a Stock Option Plan (e.g. Non-Qualified Stock Options (NQSOs), or Incentive Stock Options (ISOs).
  - a Restricted Stock Plan (e.g. Restricted Stock Shares (RSSs), Restricted Stock Units (RSUs).
  - a Performance-Based LTI Plan (e.g. Performance Cash Award, Performance Share Award, Performance Unit).
  - Other LTI and Equity Plans (e.g. Stock Purchase Plans (ESPPs / MSPPs), Stock Ownership Plans (ESOPs / KSOPs), Stock Appreciation Rights (SARs), Phantom Stock, or Unrestricted Stock Shares).
Example(s):
- SIE's LTI, ...
Counter-Example(s):
- a Short-Term Incentive Plan.
See: Equity-Based Compensation, Employee Contribution Plan, Work Performance Index, Performance-Related Pay, Performance-Linked Incentives.

References

(Wikipedia, 2018) ⇒ https://en.wikipedia.org/wiki/Long-term_incentive_plan Retrieved:2018-6-14.
- Long term incentive plan or LTIP is a type of executive compensation that typically comes in the form of performance shares or matching shares of the company. In the United States, these plans were used heavily since Internal Revenue Code Section 162(m) passed, which permitted deductions for certain performance-based compensation without limitation. Upcoming changes in the Securities and Exchange Commission's executive compensation policies, however, may change this practice. LTIPs are also used in the United Kingdom. ^[1] In Switzerland, LTIPs have seen a strong increase in use since the passing of the Swiss executive pay referendum, 2013. According to a recent report, ^[2] two thirds of companies rely on a single performance condition in their long-term incentive plan and half of the performance-based long-term incentive plans include a relative performance conditions such as Relative returns.

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%

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. …

(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.