Financial Glossary: Phantom Stock Plan


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Phantom Stock Plan

Phantom Stock Plan

An employee benefit plan that gives selected employees (senior management) many of the benefits of stock ownership without actually giving them any company stock.

Sometimes referred to as "shadow stock. It is an incentive plan that awards executives a bonus based on the market appreciation of the company's stock over a certain period of time, usually a year. Rather than getting physical stock, the employee receives "pretend" stock. Even though it's not real, the phantom stock follows the price movement of the company's actual stock, paying out any resulting profits.

Phantom stock plans are popular with family-owned companies or closely-held companies that don't want to give up Equity in the company. The amount of payment is related to the person's salary.

Posted by IQPC Ltd

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