Long Term Incentives

Companies can implement long-term incentive plans for a variety of reasons: to attract or retain employees, to drive performance and value creation over the long term, to align the interests of employees and shareholders, and to shift from fixed to variable costs.

Strategically designed, a long-term incentive program helps a company to meet its business plan, increase shareholder value and provide wealth to employees in a profitable way.

Although there may be variations, long-term incentives can be broadly classified into five main types: stock options, restricted stock, phantom shares, performance shares and performance units. Given the flexibility in design parameters, there are an infinite number of possibilities, allowing companies to customize a solution based on their unique business, talent and labor market/competitive context.

Restricted actions are an alternative that is often used when retention is the primary goal of the plan. Performance shares and performance units are more complex, but provide many benefits, including high growth potential for employees, a strong link between compensation and performance, and strong and sustainable corporate governance. They are often used by companies that want to achieve the objectives of a long-term plan, but are unwilling or unable to share the capital. This alternative is particularly popular with unlisted companies that do not plan to launch a public stock offering in the short term. Also by foreign multinationals with business units in the country.

• Assessment of the situation and needs of the company/organization
• Analysis of available accounting and financial information/business plan/risks
• Conducting executive interviews
• Analysis of the way to create business value and shareholders interest
• Review of compensation in the executive market
• Review/recommend/define desired competitive level
• Review Long Term Incentives alternatives (based on stock price or not)
• Design of the Long Term Incentive Plan that best fits the objectives outlined
• Quantification of the impact of the designed Plan
• Recommend Guidelines for Plan Administration and updating
• Documentation of the conclusions and recommendations in a report

CompStrategy can help with:

• Definition of the Competitive Strategy for the Executive Level
• Design of long term incentive plans: Stock Options, Restricted Stock, Phantom Shares, Performance Units/Shares
• Evaluation of market competitiveness regarding Long Term Incentives
• Calibration cost vs. value created for the shareholder
• Valuation of options based on the methodology of Black & Scholes
• Follow-up and update guidelines
• Counseling and Administration of Long Term Incentive Granting Cycles