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Importantly, a well-structured long-term incentive plan motivates key employees to balance long-term goals and the potential for their personal wealth enhancement tied to achieving those goals, as compared to short-term opportunities that may side-track the organization from its strategic plan in their decision-making ...
term incentive plan (LTIP) is a company policy that rewards employees for reaching specific goals that lead to increased shareholder value. In a typical LTIP, the employee, usually an executive, must fulfill various conditions or requirements.
An example of a long-term incentive could be a cash plan, equity plan or share plan.
Through LTIPs, a new long-term incentive can be granted to an employee every year, rather than a one-time incentive, similar to a holiday bonus.
Long-term incentive plans usually give rewards that are not tied to company share price. However, an executive is usually required to fulfill certain requirements as proof of contributing to an increase in shareholder value. One type of long-term incentive plan is a 401(k) retirement plan.