knowledge 26 May 2026 |

Designing Executive Compensation That Actually Works: Common Pitfalls in Irish Long-Term Incentive Plans

For all the time boards spend discussing executive remuneration, it is striking how often long-term incentive plans fall short of their core objective: driving long-term value creation. In our experience advising Irish companies across the maturity spectrum — from VC-backed growth businesses to listed plcs — LTIPs are too frequently built around precedent or “market practice” rather than the commercial realities of the business itself. The result is plans that neither motivate management effectively nor meaningfully differentiate performance.

In Ireland in particular, we commonly encounter four design pitfalls that can significantly undermine plan effectiveness:

1. Performance metrics that do not drive the right outcomes. In our experience, a comment problem in some Irish LTIPs is that they rely on performance metrics that are either too easily achievable or so heavily influenced by macro conditions that they fail to distinguish genuine outperformance. If management receives significant vesting for delivering what the market broadly delivered anyway, the plan has not succeeded in rewarding exceptional execution. The more sophisticated remuneration committees we work with are moving beyond generic benchmarking exercises and asking a harder question: what behaviour and outcomes are we actually trying to incentivise over the next three to five years?
2. Vesting schedules misaligned with business reality. We often see LTIP vesting schedules that bear little connection to the company’s actual value-creation timeline. In the LTIP context — the primary focus of this article — plans are often designed around a standard three-year cycle simply because that has become market convention, without interrogating whether that horizon genuinely reflects the business’s strategic milestones. (It is worth noting that early-stage and growth companies typically operate on a different cadence, with share options and founder equity commonly vesting monthly over four years subject to a one-year cliff — a structure that serves a different purpose and is not the focus here.) Where a three-year LTIP cycle is adopted, it should be because the timeframe aligns with the company’s planning horizon and value-creation cycle, not because it is the default. Executives are sophisticated and financially literate; they can quickly tell when a plan is a template rather than a genuine tool connected to value creation.
3. Insufficient stress testing for corporate events. It is not uncommon for plans to lack adequate provisions for M&A activity, restructuring, or leadership change. Plans should be designed with typical or expected corporate events in mind to avoid costly complications further down the road. A private company scaling aggressively towards an exit should not be using the same incentive architecture as a mature plc managing incremental annual growth — yet in practice, we see this more often than one might expect. Tailoring the plan to the company’s likely trajectory is one of the most impactful steps a board can take.
4. Suboptimal tax structuring. One of the most frequently overlooked areas is tax efficiency. We often see businesses default to structures imported from other jurisdictions without fully exploring the Irish tax consequences of those schemes.  In the private company context where, due to the lack of a liquid market for shares, it is an important when designing the scheme that one avoids implementing a scheme which could lead to the imposition of taxes for employees without the ability to sell shares to settle same.  Similarly in the public company context where there may be an obligation on executives to retain a percentage of their remuneration in shares one should have regard to the benefits that a restricted share scheme may bring in helping to align the objectives of the company by giving rise to a reduced tax charge for executives on vesting of share awards.  In some cases, approved share schemes — such as KEEP, APSS, SAYE and restricted share structures — are either not considered at all or implemented too late in the company lifecycle to maximise flexibility and efficiency. Depending on the company and workforce profile, these arrangements can significantly improve both retention and overall remuneration efficiency.