Current Trends in Equity Compensation

I was asked to present to the top executives of a Fortune 100 company and in my preparation for the presentations I spent some time researching what corporations are currently doing in regards to equity compensation.  In several of the latest surveys that Fortune 500 companies have done, a trend is developing where shareholders have been pushing for a link between equity compensation and company performance.  Most of the performance measures are in terms of corporate earnings or sales.  For example, in a 2012 survey by Frederick W Cook and Company, they found 75% of the top 250 companies issued performance shares versus 63% back in 2009.

Another trend that appears to be taking place is that companies are issuing less employee stock options and more restricted stock.  In the same 2012 survey, Frederick W Cook and Company survey they found that employee stock options that were issued in 2009 were 77% and 2012 has fallen 62%.   In addition, another survey done by Equilar, Inc., 93% of the S&P 1500 companies granted restricted stock in 2012 versus 80% in 2007 and the median number of shares granted to the executives have increased annually at 12% since 2007.

With companies tying performance into equity compensation and issuing more restricted stock versus options, it is clear to me that companies want to continue to in attract their top talent as much as they can with equity compensation incentives, but still be accountable to the shareholder for performance.

Dan’s Moral:  Companies will continue to reward top talent as long as  performance is attained.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  The example above is for informational purposes only.  Your results will vary.
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