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Long-Term Incentive Plan

Traditionally, the meaning of this phrase was restricted to a long-term (e.g. three-year) performance-based compensation plan in which the payouts (in either shares or cash) are contingent on the meeting of specified goals during the performance period. Now the phrase can also refer to any type of equity or cash incentive plan that is based on a time horizon or a vesting schedule of more than one year, by contrast with short-term incentives (e.g. an annual cash bonus). Thus, standard stock options or time-vested restricted stock can be considered LTIPs. In fact, many companies and compensation surveys refer to all equity-based compensation plans as long-term incentive plans. For details on this topic, see this website's section on performance shares.

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