Management incentive plan (MIP)

Factual definition

A negotiated plan using equity, options or other incentives to reward management. Vesting may depend on service, performance, exit conditions or a combination; an award does not necessarily create current ownership.

Also called MIP, Management incentive plan

Management incentive plan (MIP) in round numbers

Hypothetical: a management option pool is 10% of a fully diluted equity denominator that includes the pool. Other holders together represent 90% on that same basis, so the total is 100%. These are illustrative fully diluted interests, not current issued ownership or a guaranteed division of exit proceeds.

Shayne Fitz-Coy’s definition of Management incentive plan (MIP)

The management incentive plan (MIP) redraws the ownership map after closing: some managers become owners of the exit, and the rest keep their jobs. That selection is a forecast (the buyer’s judgment about who will create the value) and everyone in the building reads it.

Fitz-Coy’s operating philosophy runs at this exact joint: his standing management question is “what would you do if it were yours?”, and the MIP is the organizational attempt to make that question literal. His deal-structure teaching adds the arithmetic caution: managers who roll or receive equity own a share of equity value after debt (in his worked example, 40% of the equity on 20% of enterprise value) not a share of the headline price.

How Shayne Fitz-Coy uses Management incentive plan (MIP)

Design it so the payoff arrives at exit rather than at budget: managers should hold a version of the majority’s economics, smaller and later, so the biggest check is the one that requires the business to be worth more. Sweet equity and ratchets are the refinements.

The principle is alignment of the terminal event.

The MIP is the org chart of who the buyer thinks creates the value.

Why Shayne Fitz-Coy’s perspective on Management incentive plan (MIP) matters

The team that stays executes the value-creation plan, and they read the incentive map to learn whether they are cast as owners or as staff. A plan that pays for years and not for the exit tells them the answer regardless of what the announcement said.