What type of incentive plan should Hi-Tech Solutions Inc. create to retain its vice president without withdrawing cash?

The most suitable option for Hi-Tech Solutions Inc. to retain its vice president without withdrawing cash is a restricted stock plan. This type of incentive plan grants shares of the company’s stock to an employee, but those shares typically come with restrictions that may prevent them from being sold or fully owned until certain conditions are met, such as continued employment for a set period or achievement of specific performance goals.

Using a restricted stock plan aligns with the company’s goal of retention because it ties the vice president's financial benefit to the long-term success of the company. If the company performs well, the value of the stock can increase, providing a strong incentive for the vice president to remain with the company in order to benefit from the stock's appreciation. Additionally, because the shares are restricted, they promote a sense of loyalty and commitment from the executive.

Other incentive options, while valuable in their own contexts, may not provide the same effectiveness in this specific scenario. Stock options allow employees the right to purchase shares at a set price, which can be effective for motivating performance but may not create a strong retention incentive if the market conditions do not favor the option. A bonus compensation plan typically involves cash payments, which the company wants to avoid, and a phantom stock plan replic