Long Term Incentives

Long Term Incentives


The structure of long-term incentives plays a significant role in executive compensation strategy. While it is important to consider industry practices in the decision-making process, the primary question that needs to be answered is why an organisation would want to introduce a long-term incentive (LTI) plan to begin with. This involves closely identifying the organisation’s primary and secondary objectives so that a one-size-fits-all approach can be avoided. We assist organisations in designing comprehensive LTI programmes that align with their broader compensation and business strategies.

Support We Offer

  • Defining plan objectives
  • Nature of LTI Instruments suitable for the organisation
    • Stock Based Instruments: Stock Options, Restricted Stock Units (RSUs), Performance Shares (PSUs), and Share Settled Stock Appreciation Rights (Stock Settled SARs)
    • Valuation Based Cash Instruments: Performance Units, Phantom Stock/Cash Settled SARs; Value Share LTIPs
    • Non-Valuation Based Cash Instruments: Long Term Cash LTIPs
  • Defining eligibility criteria
  • Frequency of grants
  • Plan construction

    • Vesting period and schedule
    • Establishing performance metrics for grant and/or vesting
    • Definition of weightages in case of multiple performance metrics
    • Performance and vesting relationship
    • Exercise period
    • Employment termination provisions (good leaver/bad leaver provisions)
    • Change in Control provisions
    • Other Corporate Action provisions
    • Other design elements
  • Dilution impact analysis
  • Expensing / P&L impact analysis
  • Scenario Planning
  • Alignment with regulatory requirements (e.g. SEBI, Companies Act 2013)
  • Documentation support
    • Scheme documentation
    • Shareholder communication
  • Employee communication
  • Treatment of cash/stock-based LTI awards in special situations
    • Mergers and acquisitions
    • Corporate actions (e.g. spin-offs)
    • Addressing underwater stock-based grants