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It is widely acknowledged that Management Incentive Plans ('MIPs') are a common tool applied by the PE houses. They deliver the alignment of managements' interests with those of the shareholders by giving management a slice of the cake and skin in the game.
The Management Incentive Plan (?MIP?) applies to designated Executive Officers of the Company and is designed to motivate the achievement of established performance goals.
A MIP can be either an equity incentive plan or a cash incentive plan. It doesn't always have to result in a company giving away equity, as certain factors may preclude them from doing so. Cash-based plans usually involve either a cash bonus, pension contribution or shadow equity.
Management Incentive Plan (MIP) is a term most commonly used to refer to the scheme over which the ?sweet equity? pool is allocated to senior management in a privately owned business. The company using a MIP will often be owned by a private equity house.
Payout Opportunity A Participant's payout target amount under the Plan is determined by pay grade as follows: The range of incentive opportunity for a Plan Participant is 0% to 200% of the Participant's total value target. This means the maximum payout that a Participant can receive from this Plan is 200%.