A program is developed to give employees a stake in enterprise capital.

Planning is based on the financial resources available for the program and on statutory, pay scale, and company provisions. Therefore, information is obtained on these areas at the start of the planning process.

When the program is actually designed, the following characteristics are determined:

• The type of long-term incentives
• The number of incentive shares
• The provisions for granting incentive shares to employees
• The provisions for business transactions that can be performed after incentive shares have been granted

The type of long-term incentives consists of a specific kind of real or virtual security that represents a stake in enterprise capital. Examples include stocks, stock options, convertible bonds, and "simulated" options.

At this point, the provisions for granting incentive shares to employees are roughly determined. They can be determined more precisely later when a specific granting round is planned.

The business transactions that can be performed after incentive shares have been granted consist of exercising long-term incentive rights (such as option rights) and the expiration, forfeiture, retraction, or sale of long-term incentives.

The types of business transaction that can be performed, and the conditions under which they can be performed, must be determined for the various long-term incentives.

During the planning phase, one or more alternatives for long-term incentive programs are drawn up. On the basis of an evaluation, a decision is made whether to adopt a long-term incentives program (that is, whether to release it for implementation) or whether to continue planning by correcting existing alternatives or creating new ones. In practice, the decision process can be relatively complicated. At joint-stock companies, for example, stockholders can be required to approve some types of incentive.

The long-term incentives program is publicized at the enterprise. If necessary, implementation actions are performed to prepare managers for the program’s practical implementation. Courses and information events are examples of such implementation actions.

The following specifications are determined for a long-term incentives program:

• The number or value of incentive shares to be distributed
• The criteria used to distribute incentive shares to employees (performance, position at the enterprise, length of service at the enterprise, etc.)
• The organizational provisions for granting incentive shares (Who decides how many incentive shares are granted to individual employees? How are decisions delegated? What is the schedule?)
• Precise provisions for business transactions that can be performed after incentive shares have been granted

Incentive shares are granted to employees. Each manager checks whether he or she grants incentive shares in his or her own area of responsibility, or whether this task is delegated to lower-level managers. If delegation takes place, specifications are defined in more concrete terms.

A grant plan is created for employees within an area of responsibility. It determines the number of incentive shares that each employee is to receive.

More than one alternative can be created and evaluated for the grant plan. A decision must then be reached as to whether to accept one of the alternatives, or whether to create new alternatives or correct existing ones.

The grant plan that is created is released for consolidation or approval.

When consolidation takes place, different granting subplans are brought together in a comprehensive plan. Prior to consolidation, a check is performed to ensure that all necessary subplans exist and that they meet the given specifications.

The grant plan is checked to ensure that formal specifications have been observed and that an adequate number of incentive shares have been granted. A decision is made as to whether the plan is approved or whether corrections are still required.

A manager checks whether he or she should make a correction in his or her own area of responsibility, or whether this task is delegated to a lower-level manager. If delegation takes place, correction specifications are defined in more concrete terms.

The approved grant plan is implemented. The incentive shares included in the plan are granted to employees.

The employee is informed of the fact that long-term incentives have been granted.

An employee enters a request to exercise his or her long-term incentive rights.

The request is checked to ensure that formal specifications for exercising rights have been observed.

For example, exercising such rights might only be permitted on specific dates or to a certain extent.

A decision is made as to whether the request is approved or rejected.

The employee is informed of the approval of his or her request to exercise rights.

An employee exercises his or her long-term incentive rights.

For example, he or she could have the right to acquire enterprise stock at a fixed price (stock options).

The employee is notified that his or her request to exercise long-term incentive rights has been rejected and is notified of the reasons for the rejection.

The employee is informed of the imminent expiration of long-term incentives.

Long-term incentives can be created in such a way that they or some of their resulting rights expire on particular dates that were determined earlier.

If long-term incentives expire, their expiration is documented in the system.

The employee is informed of the expiration of long-term incentives.

Employees’ possession of long-term incentives can be linked to certain conditions. If the conditions are not observed, employees can lose the share of the long-term incentives that they have been granted.

Long-term incentives may be forfeited if the work relationship is terminated or if goals are not met.

The employee is informed of his or her forfeiture of long-term incentives and of the reasons why.

Under certain circumstances, the shares of long-term incentives granted to employees may need to be retracted from all employees.