Long Term Incentive Plans
Design Features:
- The most common form of long-term plan is a Performance Unit Plan.
- Awards are earned by achievement of specific goals over an extended period based on company's long-range planning cycle (3-10 years).
- Performance periods may run sequentially or they may overlap based on the desired results. Cliff vesting typically coincides with the performance periods.
- Earned awards may be paid in cash or stock, but are typically paid at the end of each performance period. Awards may vary up or down from target awards based on actual performance.
Advantages:
- The Participant is aware of the fixed award at the outset and the necessary target performance.
Disadvantages:
- Awards are not directly tied to company profitability or growth.
- Company must disclose financial information to participants.
- Difficult to add new participants during performance period.
To find out more on how Compensation Resources, Inc. can help your company with Long Term Incentive Plans, please contact us or call us directly to speak with our compensation consultants at 877-934-0505.
