03. Who should participate in the LTIP?

Not everyone gets long-term incentives as part of their compensation, but those who do have the greatest ability to influence the results and drive the value of the company.

Practices vary widely across organizations on granting LTI as part of the package, and it’s possibly one of the most company-specific questions one can ask. Much depends on the culture and the mentality your firm is trying to build.

Distributing LTIs in form of shares or stocks to all levels of employees will result in diluting the ownership and not necessarily encourage better performance, as many lower-ranking employees are not interested in being personally invested in the company but rather value a higher salary today.

Typically you should grant the award to the key figures who would want to act like owners and appreciate potential future equity above instant gratification in the form of short-term cash bonuses.

These generally include the C-suite: CEO, CFO, COO, Top Legal Officer, General Counsel, Senior Vice-President, Division Presidents, Chief Sales Officer, Chief Marketing Officer, Chief Human Resources Officer, Chief Administrative Officer, Chief Technology Officer, or Chief Information Officer.

Government regulations are another potential determining factor, as in the United States S-Corps are limited to 100 shareholders if they want to keep favorable tax status.

Generally, you should offer LTI plans to those individuals, who are crucial to the success of your firm, usually starting with the C-suite, and consider expanding to other high-performing and high-potential employees who could be susceptible to poaching by the competition. They can also be very helpful in retaining key figures during an acquisition, a merger, or challenging market conditions.