Phantom Stock Plan

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What is a Phantom Stock Plan?

A Phantom Stock Plan is an employee benefit scheme that gives selected senior managers a bonus based on the market appreciation of the company's stock over a certain period of time without actually giving them any company stock.

Rather than getting the actual physical stock, the manager receives a cash payment. Even though it's not real, the phantom stock follows the price movement of the company's actual stock, paying out any resulting profits.

Some plans also provide for dividend equivalents, i.e., managers will receive amounts equal to dividends declared on the stock.

Normally, participants must remain employed by the company for a certain number of years to receive the payout, and the amount of stock received is related to the person's salary.

Also referred to as Shadow Stock Plan and Stock Appreciation Rights.

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