A long-term incentive plan or LTIP is a type of

executive compensation Executive compensation is composed of both the Salary, financial compensation (executive pay) and other non-financial benefits received by an Senior management, executive from their employing firm in return for their service. It is typically a mix ...

that typically comes in the form of performance shares or matching shares of the company. In the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

, 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 The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...

's executive compensation policies, however, may change this practice. LTIPs are also used in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

. In

Switzerland Switzerland, officially the Swiss Confederation, is a landlocked country located in west-central Europe. It is bordered by Italy to the south, France to the west, Germany to the north, and Austria and Liechtenstein to the east. Switzerland ...

, LTIPs have seen a strong increase in use since the passing of the Swiss executive pay referendum, 2013. According to a recent report, 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 return Relative return is a measure of the return or profit of an investment portfolio relative to a theoretical passive reference portfolio or benchmark. In active portfolio management, the aim is to maximize the relative return (often subject to a ris ...

References

Executive compensation Incentives {{economics-stub

See also

References