Long-term incentive
Also called LTI, LTIP, long-term incentive plan.
Multi-year awards, usually PSUs, RSUs, or options, meant to align executives with longer-term results. The full grant-date value still lands in a single SCT year.
What it is
A long-term incentive (LTI) is pay meant to cover more than one year, usually equity: annual RSU/PSU/option grants, or a front-loaded multi-year block. Cash long-term plans exist but are less common at S&P 500 companies. In the SCT, LTI grants hit Stock Awards and Option Awards in the year of grant at grant-date fair value—not pro-rated across the performance period.
That single-year hit is the usual reason a ranking year “includes more than one year of equity design.”
Why companies use it
LTI is the primary alignment and retention tool. A three-year PSU plus overlapping RSU grants means an executive always has unvested value outstanding.
Shareholders and proxy advisors look at LTI mix (how much is performance-based) more closely than at salary.
Pros
- Extends the horizon beyond the annual bonus.
- Unvested LTI is a retention balance sheet.
- Grant-date SCT reporting shows the annual decision in one place.
Cons
- A front-loaded LTI award wrecks year-over-year totals.
- Overlapping cycles are hard to read from one SCT row.
- Calling time-based RSUs “long-term incentive” stretches the word “incentive.”
Examples
Regular annual LTI
Each March the CEO receives $8 million RSUs and $8 million PSUs. Each SCT year shows about $16 million of stock awards. Totals are comparable year to year if salary and bonus are stable.
Front-loaded LTI
The same $48 million intended over three years is granted at once. One SCT year absorbs it. CompensationBase does not annualize the grant; an unusual-grant-year note may appear.
On CompensationBase
LTI grants still hit a single SCT year at grant-date fair value. That is the usual reason a ranking year includes more than one year of equity design.
Related terms
- Performance share unit
An equity award that vests based on performance goals such as relative TSR or EPS. The SCT reports grant-date fair value, which can differ from shares that later actually vest.
- Multi-year equity award
A stock or option grant whose accounting value is reported entirely in the grant year even though it is meant to cover several future years. CompensationBase does not annualize these grants.
- Equity compensation
Pay delivered as stock, options, or similar awards. On CompensationBase, equity is stock awards plus option awards, and it drives the mix bar’s Stock segment and unusual-grant-year flag.