Understanding Your LTIP Options at Procter & Gamble
/As a Procter & Gamble (P&G) employee, you have a unique opportunity to shape your financial future through the Long-Term Incentive Program (LTIP). This program lets you customize your compensation to fit your personal goals, a flexibility few companies offer. In this blog, we’ll break down your LTIP options, weigh their pros and cons, and guide you toward a choice that aligns with your needs.
What Are LTIP Options?
P&G’s LTIP rewards your contributions to the company’s success while aligning your interests with shareholders’. Eligible employees can receive awards as Stock Options, Restricted Stock Units (RSUs), or a mix of both, based on a cash equivalent value set by P&G.
Stock Options grant you the right to buy P&G stock at a fixed grant price over a 10-year term, profiting if the stock price rises above that price. Their value depends on stock growth and an estimated cost set at grant.
Restricted Stock Units (RSUs) deliver a set number of P&G shares after a 3-year vesting period, calculated by dividing the cash value by the grant-date stock price. They earn dividend equivalents during vesting and convert to shares automatically.
Your LTIP Choices
You can choose how your LTIP award splits between Stock Options and RSUs:
100% Stock Options
75% Stock Options, 25% RSUs
50% Stock Options, 50% RSUs
25% Stock Options, 75% RSUs
100% RSUs
Let’s examine each component’s pros and cons.
Stock Options
Pros:
High upside if P&G stock grows significantly
You control exercise timing (between years 3 and 10), managing income and taxes
No tax at grant
Cons:
Worthless if stock price falls below grant price
Requires active management and decision-making
Higher risk compared to RSUs
Restricted Stock Units (RSUs)
Pros:
Guaranteed value as long as P&G stock has any value
Simple—no action needed for delivery
Dividend equivalents add value during vesting
Lower risk
Cons:
Less upside than Stock Options
Fixed delivery and tax timing (year 3)
Choosing the Right Mix
The best blend of Stock Options and RSUs hinges on your financial situation, risk tolerance, and long-term goals. Consider these factors:
Risk vs. Value: Stock Options offer greater upside but more risk; RSUs provide stability with less potential reward.
Time Horizon: Options span 10 years, ideal for long-term growth; RSUs deliver in 3 years, suiting shorter needs.
Portfolio Balance: How much P&G stock do you hold? Diversification matters.
Stock Outlook: Past trends (not predictors) and your view of P&G’s future can guide you.
Cash Flow Needs: RSUs offer predictable year-3 income; Options flex for later goals like retirement or big expenses.
Align your choice with your broader financial plan—home purchases, education, or retirement—and monitor overlapping grant cycles (e.g., RSUs vesting, options expiring).
LTIP decisions are complex and impactful. Vaultis Private Wealth specializes in P&G employees’ unique needs, helping you analyze your options, assess risks, and build a strategy for long-term success. Contact us to optimize your LTIP.
Disclosures:
The information in this blog is for educational purposes only and is not intended as personalized financial, investment, tax, or legal advice. The LTIP options discussed may not be suitable for everyone, as individual financial goals, risk tolerance, and circumstances differ. Consult a qualified financial advisor, tax professional, or legal advisor before acting to evaluate your specific situation and determine if these options fit your needs. Past performance of P&G stock does not guarantee future results, and investments in Stock Options and RSUs involve risks, including the potential loss of principal. Tax laws may change, potentially affecting the strategies described; this content reflects laws as of December 13, 2024. Vaultis Private Wealth does not guarantee the accuracy, completeness, or outcome of this information and is not affiliated with Procter & Gamble, which does not endorse this content or compensate Vaultis for any services mentioned.