A long-term incentive plan or LTIP is a type of

executive compensation Executive compensation is composed of both the financial compensation (executive pay) and other non-financial benefits received by an executive from their employing firm in return for their service. It is typically a mixture of fixed salary, variab ...

that typically comes in the form of performance shares or matching shares of the company. In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

, these plans were used heavily since Internal Revenue Code Section 162(m) passed, which permitted deductions for certain performance-based compensation without limitation. Upcoming changes in the

Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

's executive compensation policies, however, may change this practice. LTIPs are also used in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...

. In

Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are installed in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel ...

, LTIPs have seen a strong increase in use since the passing of the

Swiss executive pay referendum, 2013 The 2013 Swiss executive pay initiative of 2013 was a successful federal popular initiative in Switzerland to control executive pay of companies listed on the stock market, and to increase shareholders' say in corporate governance. It was one of th ...

. According to a recent report, two thirds of companies rely on a single performance condition in their long-term incentive plan and half of the performance-based long-term incentive plans include a relative performance conditions such as

Relative return Relative return is a measure of the return of an investment portfolio relative to a theoretical passive reference portfolio or benchmark. In active portfolio management, the aim is to maximize the relative return (often subject to a risk constrain ...

References

Executive compensation {{economics-stub

See also

References