A “Long-Term Incentive Plan (LTIP)” is a compensation strategy designed to align the interests of employees, particularly executives, with the long-term goals of a company. LTIPs typically offer rewards based on the company’s performance over a period of several years. These incentives often come in the form of stock options, performance shares, or restricted stock units, which vest based on meeting specific performance targets or after a set period of time.
For example, a company might offer its executives an LTIP that includes stock options that vest over a five-year period, contingent upon achieving certain financial performance metrics like revenue growth or earnings per share. The goal of an LTIP is to motivate employees to focus on the company’s long-term success, fostering a sense of ownership and encouraging actions that drive sustainable growth.
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