Long-Term Incentive Plan - LTIP

Filed Under » ,
Dictionary Says

Definition of 'Long-Term Incentive Plan - LTIP'

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 and/or requirements that prove that he or she has contributed to increasing shareholder value. The incentives for doing this are usually conditional company shares, which are distributed in two parts. The first part represents an immediate distribution of half of the shares, while the remaining half of the shares will only be presented to the executive if he or she stays with the company for a predefined number of years.
Investopedia Says

Investopedia explains 'Long-Term Incentive Plan - LTIP'

Some businesses have replaced pure options-based incentives in favor of LTIPs. One criticism about how some firms have been using LTIPs is that executives still receive the second half of the reward even if their performance has not been exceptional in the subsequent years. This is because in order to receive the second portion of the shares, the executive must only succeed in not being terminated in the designated time span.

In some forms of LTIP, recipients receive special capped options in addition to stock.

Articles Of Interest

  1.

    The Dangers Of Options Backdating

    This form of executive compensation can pose serious risks for investors.

  2. A New Approach To Equity Compensation

    The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here.

  3. Should Employees Be Compensated With Stock Options?

    Learn the good, the bad and the ugly sides of this type of payout.

  4. Evaluating Executive Compensation

    Find out how to determine whether a CEO is being overpaid.

  5. The Diner's Guide To Tipping

    A look at the standards for tipping service staff in some popular vacation destinations, and the rationale for each custom.

  6. Broker Commissions Are Here To Stay

    With two developed nations adopting a firm anti-commission stance, questions have arisen over whether or not the United States should follow suit. Find out why such a development is unlikely.

  7. 10 Great Summer Jobs For Teens

    There are a lot of summer jobs out there, find out what's available, how much it costs and what skills you need.

  8. Playoff Perks For Pro Athletes

    If personal pride, a stellar resume and increased job security aren't enough incentive for some pro athletes, each league has reserved a bit of lunch money to up the ante and help tide athletes ...

  9. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  10. 5 Common Misconceptions About ETFs

    The rise in these funds' popularity has contributed to misinformation about what they are and how they work. Learn more here.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  2. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  3. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  4. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  5. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

  6. Chartalism

    A non-mainstream theory of money that emphasizes the impact of government policies and activities on the value of money.
Trading Center