Long‐term incentive schemes, executive remuneration and corporate performance: an empirical study

UK plcs use option schemes and increasingly long‐term incentive plans (LTIP’s) to reward their executive directors in order to improve corporate performance and align their interests more closely with those of the shareholders of the company. This paper presents a study of the option and LTIP arrangements used by a sample of 51 large UK companies over the period 1994‐2001. The general finding is that a substantial proportion of the schemes are “undemanding” rewarding average rather than exceptional performance.