Phantom stock plans can be a valuable incentive compensation method for companies that are looking for a way to attribute it to changes in the value of the business, but do not want to directly assign shares. Below are answers to nine frequently asked questions to give you an overview of Phantom Stock`s plans and what they might mean for your business. one. Because a Phantom Stock plan is an unqualified plan for deferred compensation, companies have great flexibility in planning. When formulating aspects of the written plan, companies should address the following issue: an employer enters into an agreement with a number of employees. In accordance with the provisions of the plan, the employer grants workers a certain number of phantom units or actions. The document informs staff of the initial value of the shares as well as other conditions of the plan, such as. B.dem set up schedule, payment events, the availability of phantom dividends (if any) and more. Ghost actions, also known as synthetic equity, have no inherent requirements or restrictions on their use, so the organization can use it, regardless of the choice. Phantom shares may also be modified at the discretion of management. Some organizations may use Phantom Stock as an incentive for superior management. Phantom shares directly link a financial profit to a company performance metric. It can also be used selectively as a reward or bonus for employees who meet certain criteria.

Phantom shares can be made available to any employee, either as a total benefit, or based on performance, seniority or other factors. A Phantom Stock plan is an employee performance plan that offers selected employees (senior management) many of the benefits of holding shares without really giving them corporate shares. This type of plan is sometimes referred to as a shadow stock. For example, if “A” employees received 1,000 phantom shares with a share valued at $20, the current value of the company`s stock would be $20,000. Assuming that, under the terms of the agreement, the employee must stay with the company for five years to fully benefit from the Phantom Stock agreement. This calendar requirement is called the “vesting” period. Frequently asked questions about stock options and tax effects A. The value of phantom share units is measured on the basis of the value of the company`s workforce. The value can be determined by an explicit written formula or determined by assessment.