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Phantom Stock Plan

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Phantom stock plan
An incentive scheme that awards management bonuses based on increases in the market price of the company's stock.

Phantom Stock Award
A plan to compensate senior management of a publicly-traded company in which the company grants an employee a "hypothetical" stock. That is, the company gives the employee the benefits of owning stock in the company without actually giving him/her stock. The phantom stock increases or decreases in price and pays dividends as if it were real. Eventually, the phantom stock is settled and cash is distributed to the employee. See also: Stock option.

phantom stock plan
An incentive plan for a firm's executives in which the executives are offered bonuses based on increases in the market price of the firm's stock. A phantom stock plan is supposed to induce the executives to act in the best interests of the shareholders.


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There are two types of phantom stock plans, "growth" and "basic".
Phantom Stock The difference between a phantom stock plan and SARs is that the grantee of a phantom stock unit typically receives, as part of the grant, the full value of a share of stock, while the grantee of a SAP.
For example, employers providing 401(k), employee stock purchase plans, qualified and non-qualified employee stock options, phantom stock plans, or other equity-based compensation plans routinely provide an explanation of the tax consequences of various transactions to affected employees.
 
 
 
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