LTIP: Long-Term Incentive Plan
An LTIP is not a specific type of share plan, but can apply to any kind of plan that usually operates by releasing shares to selected higher level executives over a long term period (at least 3 years, and often 5 years or longer).
LTIP: About the Long-Term Incentive Plan
LTIPs are frequently used in larger or listed companies to benefit selected individuals at director or management level. LTIPS can be structured in a variety of ways but a common approach is to award shares to individuals on a deferred basis (sometimes by way of an Employee Benefit Trust), so that individuals only have the right to receive the shares subject to stretching performance targets.
LTIP: Benefits of a Long Term Incentive Plan
Under an LTIP, the individual benefits from the whole value of the share – unlike a share option, where he will only benefit from the growth in value of the shares beyond the exercise price. The company can therefore use fewer shares to deliver the same level of reward provided under an option plan – which can assist with dilution issues.
This also avoids the difficulty of “underwater” options – an LTIP can never be underwater since shares can never be worth less than nothing.
Particular advantages of the LTIP include:
- Avoids dilution for shareholders
- Avoids difficulty of underwater options
- Can attach significantly stretching loyalty and performance targets, including bonus shares for extraordinary performance or clawback for underperformance
- Align executives’ interests with that of shareholders
- Company can tailor the plan structure to meet specific needs
- Promote long-term view and retention of key employees
- Encourage growth by linking awards to performance conditions
- Provide a framework to include new participants, if required
- Attract top candidates to companies
For more detailed information on the benefits of LTIP, please download our fact sheet, or call 020 8949 5522 to speak with one of the team.
LTIP: How we can help
At RM2, we believe in taking a consultative approach to building share plans and finding out precisely what our clients are looking to achieve. This approach helps us to deliver a professional and effective service, helping clients meet their goals and plan for the future. Our highly experienced team is well positioned to guide your company through every stage of the share scheme process, including:
- Strategic review
- Plan design
- Shareholder resolutions
- Articles of association
- Share valuations
- Employee communications
- Plan administration
- Option expensing
- Ongoing support
We have successfully designed, implemented and administered over 700 share plans across a range of sectors, so you can rest assured your plan will be in the best possible hands!
If you would like to find out more about how an LTIP can help your business, why not call a member of our team directly on 0208 949 5522, request a callback using the button located at the top of the page, download our fact sheet or send an email to firstname.lastname@example.org!