What Is A Phantom Stock Option?
A phantom stock option or phantom equity plan is a performance-based plan that provides the employee with a ghost or simulated ownership. The employee is given notional shares at a benchmark price with a right to exit at a future price which could be the market or traded price or a price determined on the basis of predecided valuation criteria. Therefore, the company does not have to dilute its equity
Restricted Stock
A grant of a specified number of shares of stock, with full ownership of the shares contingent on the satisfaction of vesting conditions, which may be service-based or performance-based. Recipients typically entitled to voting and dividend rights during the restricted period
Performance Share Plans
The vesting of performance shares is tied to the achievement of pre-set corporate (or division) performance goals, rather than only to continued service. Under a typical plan, a recipient will earn a specified number of shares if pre-established performance goals are achieved. The number of shares awarded will depend on the level of goal achievement, with a threshold, target and maximum award level set at the time of grant
Cash LTI Plans
The vesting of cash long-term incentives (LTI) awards is tied to the achievement of pre-set corporate (or division) performance goals, rather than only to continued service. Under a typical plan, a recipient will earn a specified dollar amount if pre-established performance goals are achieved. The dollar amount awarded will depend on the level of goal achievement, with a threshold, target and maximum award level set at the time of grant
What is the difference between a phantom stock option and an ESOP?
Let's consider an example: A stock option is given at 100 with a vesting period of one year. At the end of the year, say, the market price is 250, then the option has a value of 150. However, if the stock price is 80, then there is no value in the stock option. But if a phantom stock option was given (phantom is usually given out at no or negligible cost), then it would have made 80 for the employee in the scenario of a market fall. Since the employee would have made some cash instead of nothing, phantom seems to be a better option
