A bonus has no ownership spirit.

Of course, a well-balanced bonus model measures and rewards performance targets, which ideally also indirectly influence the company’s success. In some cases, pools are even created that are funded by company profits and distributed to employees (profit-sharing models).

But does this lead to employees feeling as if they own part of the company? Probably not.

Bonus: Reward without ownership spirit

Bonus schemes create a link between performance and compensation. In many cases, there is also an indirect link to the company’s success.

Nevertheless, this connection remains limited. While employees benefit from the company’s success, they do not become co-owners, neither legally nor in their self-perception.

A bonus thus remains primarily a tool for short-term performance-based compensation.

LTI: Remuneration with ownership

This is where a long-term incentive (LTI) comes into play.

An LTI is often also referred to as employee share participation plan. And that’s precisely the difference. Employees become co-owners or at least have a financial stake in the company.

This fosters a genuine sense of ownership.
This typically manifests itself in the following aspects:

• stronger entrepreneurial thinking
• longer-term perspective
• greater alignment of interests
• clear focus on sustainable business success

The difference to a bonus lies not only in its structure, but also in its effect.

Framework conditions and limitations of LTI models

Of course, there are also limitations to long-term incentive (LTI) models.

In the initial phase, these typically involve smaller stakes. An LTI can be a first step in long-term succession planning, but it does not lead to significant changes in the majority ownership structure in the short term. The existing owners retain control.

Long-term incentives (LTIs) are also not suitable as a primary capital raising measure for the company. Reasons for this include:

• the typical size of the equity stakes
• the often discounted issuance of shares
• the necessary (or recommended) possibilities for employees to sell their shares
• the limited financial resources of employees

Practical impact

Within this framework, long-term incentives (LTIs) can still have a decisive impact.

They can lead to selected employees feeling more like co-owners, or, depending on the model, actually becoming co-owners. This fosters a sense of entrepreneurial co-responsibility for the company’s performance, coupled with corresponding risks, but also with the opportunity to participate in profits and future value growth.

This leads to the participating employees engaging more deeply with the company’s development and fostering a personal interest in positive value creation.

It creates a direct link between individual efforts, company development, and long-term compensation.

Conclusion

A bonus can reward performance.
Long-term incentives (LTIs) can foster ownership spirit.

For companies, this means:

Those who want to promote genuine entrepreneurial spirit need more than short-term incentives.

They need tools that enable participation—both financially and conceptually.

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