Direct Investment in Company Equity Plans
More commonly known as Long Term Incentive Plans
A Long Term Incentive Plans (LTI plan or LTIP) is a way for employers to reward, motivate, attract and retain employees. An LTI plan can take many different forms. Let’s take a look.
What is an LTI(P)?
Let’s start with the first part of the term: long term. It means that this type of plan will go for the long run, for example 3 to 5 years. Quite a difference with short term incentives indeed! And the second part of the term is clear: incentive plan. Its goal is to incentivise talented and valued employees.
So, when
talking about a long term perspective, we talk about long terms goals. The
company sets up long term goals – if an employee meets those goals, he will be
rewarded. The exact content of that reward can differ: it could be options,
shares or cash for example. The real goal is retention and aligning the
interest of employer and employee.
SOP
An employer can decide to grant stock options on the
company to certain employees. After the vesting & locking period, the
beneficiary will be able to cash the added value (cashless exercising) or he will become shareholder.
DSPP
Discounted Shares is a way to offer employees the possibility to buy shares at a certain discount.
RSU & PSU
Restricted shares are typically awarded to employees with the condition that they stay with the company for a certain period of time.
Performance shares are awarded to employees based on the performance.
Free Shares
Why not offer shares for free to the employees as part of the overall compensation?
So many possibilities!
Want to know more?