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LTIPS debunked

What’s an LTIP and how do I get one?”

This came from Ted, the operations manager of a defense electronics firm.

I loved his candor.

LTIPS (pronounced ell-tips) are the the generic term for any long-term incentive program (typically tied to stock or company equity).

It is also a major source of confusion for candidates.

Here’s why:

  • No two LTIPs are identical. 
  • Individual companies call them different names…including SIPs, MIPs, ESOPs or LTIs

Here’s how they typically work:

  • The company grants you equity (through a sign-on or annual grant).
  • To obtain the full reward, you must wait until your vesting cycle is complete (typically 3-5 years).
  • Since the grants can be rewarded as may as 1-4 times a year, you can rack up a lot of equity in the course of 5 years. This amount is known as what’s in “the kitty.”

Your money in the kitty grows—making it incredibly tough for a competitor to offer you comparable compensation.

If you do not have an LTIP, you are known as a free agent.

Being a free agent can be incredibly attractive to firms hiring executive leaders.

The easiest way to get in on this action is by joining an employee-owned firm where everyone gets one.

Start-ups will also give you equity grants if you get in early.

The threshold to obtain LTIPs is lower at public firms than private… but private firms can have robust programs involving phantom shares or (for CXOs) equity that is granted upon a transaction.

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