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

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

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

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., federal district, five ma ...

, 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 U.S. 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. The primary purpose of the SEC is to enforce the law against mark ...

'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 Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

. 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, 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.

References

Executive compensation {{economics-stub

See also

References