Drafting US short- and long-term incentive and bonus agreements

Published by a LexisNexis Share Incentives expert
Practice notes

Drafting US short- and long-term incentive and bonus agreements

Published by a LexisNexis Share Incentives expert

Practice notes
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Employers frequently grant equity awards and cash bonuses to incentivise key employees. The first part of this Practice Note focuses on key considerations with awards that are intended to encourage a key employee to accept a position with the employer (ie, a sign-on bonus or sign-on equity awards).

The second part of this Practice Note addresses short- and long-term cash incentives to influence executives to remain with the employer and/or focus on specified performance goals.

This Practice Note is divided into the following sections:

  1. Sign-on bonuses and sign-on equity awards

  2. Short-term cash incentives

  3. Long-term cash incentives

For information on equity incentives to encourage key employees to remain with the company, see Practice Notes: Understanding types and taxation of US equity compensation, Designing a US public company equity compensation plan, and Drafting a US private company equity compensation plan.

Sign-on bonuses and sign-on equity awards

Sign-on bonuses

Sign-on bonuses most commonly occur when an employee would forfeit equity, deferred compensation, or other amounts by resigning from their current employer. In other

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Short definition
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An investor is ‘short’ when the exposure to a given asset is less than the level considered neutral.

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