Long Term Incentive Pay.doc

Long Term Incentive Pay
Long Term Incentive Pay
Cash based (LTIP)
Long Term Cash Incentive Pay is a performance driven award that pensation based on a three to five year performance period and calculated as a multiple of base salary3>. Performance can be measured against an industry peer group panies and the projected long term growth of pany, just to name a few. Awards are based on a multiple of base salary.
Equity Based
STOCK OPTIONS
The award of stock options represents the monly used form of long term performance incentives. The grant awards are designed to incentivize the executive to perform because he or she has a long term stake in the future of pany, through eventual stock ownership. A majority of panies issue fixed priced stock options (fair market value determined on the date of the grant). Start panies and other privately panies often engage in the issuance of ;in the money; stock options, options that have a strike price that is below the fair market value. Among panies, the fair market value is not readily ascertainable and mittee seeks to promote increased incentives among initiating employees/incorporators. The present and immediate future value of these business entities is a direct function of employee initiatives and performance.
The taxation of stock options is routinely debated, and revolves around the issue of when the ;property; transfer has taken