Long-term incentives generally comprise the largest component of executive pay -- typically over 60 percent for the median S&P 500 company. The purpose of the long-term incentive is to reward executives for achievement of the company’s strategic objectives that will maximize shareholder value. These may be provided in the form of stock-based compensation, such as stock options, restricted stock, performance shares, cash, or stock-settled performance units. Usually, long-term incentives are a mix of types of equity and may include a cash component. The performance period for a long-term incentive typically runs between three and five years, with the executive not receiving any pay from the incentive until the end of the performance period. Long-term incentive goals vary by company but the most prevalent are focused on total return to shareholders, operational measures such as earnings per share and return measures, such as return on assets. Like annual incentives, long-term incentives are typically structured to include a targeted level of performance, as well as a stretch component to reward executives for achieving superior performance. The Center considers long-term incentives an important part of a well-balanced pay plan, as they ensure alignment with the shareholder interest, especially when combined with appropriate stock ownership guidelines.