Image of Executive pay:  what are long-term incentives?

Executive pay: what are long-term incentives?

Long-term incentives routinely comprise the biggest portion of an executive’s compensation.  Companies offer long-term incentives to retain talent and encourage executives to realize the company’s strategic goals and objectives.

Long-term incentives are normally granted as some form of equity compensation, such as:

  • stock options (the executive can buy or sell the company’s stock at an agreed (exercise) price within a set period of time)
  • restricted stock shares/units (an award of stock with restrictions usually contingent upon working for the company a particular length of time)
  • performance shares/units (an award of stock with restrictions often related to achieving company performance goals)

Typically, the equity grants will vest over a specific period of time, essentially making the executive an investor in the company’s performance. The vesting period varies by company but usually covers a period of 3 to 5 years. Long-term incentives that have not vested are typically forfeited once the executive departs the company.

Eric Bachman litigates employment discrimination and whistleblower retaliation cases. He can be reached at (202) 769-1681 and [email protected]. Bachman is Chair of the discrimination and retaliation Practices at Zuckerman Law. Previously, Bachman served as Special Litigation Counsel with the U.S. Department of Justice’s Civil Rights Division, and a Deputy Special Counsel with the U.S. Office of Special Counsel.