At myStockOptions.com, we love stock plan surveys. They provide instructive views both on the way companies grant equity compensation and on the way plan participants use their awards and the shares acquired from them. We often come across surveys on a range of topics involving stock compensation, ESPPs, and company stock holdings that are of interest to companies, individuals, and advisors. Below we discuss a few we have seen over the past few months.
2016 NASPP Survey On Stock Plan Design
Conducted every two years, the Domestic Stock Plan Design Survey is the flagship survey of the National Association of Stock Plan Professionals (NASPP), which produces it with co-sponsor Deloitte Consulting LLP. The 2016 survey contains a wealth of data from more than 400 companies on stock plan design/granting practices, restricted stock/RSUs, performance share/units, and stock options/SARs. The NASPP's blog summarized key findings of the survey:
- Use of full-value awards continues to increase. The percentage of the surveyed companies making time-based restricted stock/RSU grants increased to 89% in 2016 (up from 81% in 2013). Grants are most commonly in the form of restricted stock units.
- Use of stock options continues to decline. At all employee levels, stock options are granted by 51% of the survey respondents (down from 54% in 2013). Only 18% of them granting incentive stock options.
- Performance awards are for executives. In 2016, 80% of the surveyed companies granted performance awards to CEOs and NEOs (up from 70% in 2013). The percentage of companies making performance grants to other senior management grew to 69% (up from 58% in 2013).
- TSR is the top metric for performance grants. In 2016, 52% of the surveyed companies that grant performance awards used TSR as a performance metric (up from 43% in 2013). Nearly all (92%) use relative performance. Most (81%) pay out even if TSR is negative as long as the company outperformed its peers, and some cap the payout (69%).
- Dividend payments increase. More than three quarters (78%) of the surveyed companies pay dividends with RSUs, up from 61% in 2007. Companies commonly pay dividends when the underlying award vests.
- Payouts to retirees. Some type of accelerated or continued vesting upon an employee's retirement is common: 60% of companies making stock grants/awards; 68% of companies granting performance awards; and 60% of survey respondents that grant stock options.
For a roundup of stock plan design surveys from various sources, see the related FAQ on myStockOptions.com.
Employee Stock Purchase Plans
We are big fans of employee stock purchase plans and the role that ESPPs can play in the financial well-being of employees. In fact, with all of our content on ESPPs, myStockOptions.com could just as well be called myESPP.com. A recent survey of more than 2,000 ESPP participants by Fidelity Investments shows how those employees actually used funds from ESPP stock sales to improve their financial wellness:
- payment of bills and debt (34% of the respondents)
- emergency funds (11%)
- home improvements (10%)
- reinvestments in stocks or mutual funds (10%)
- reinvestments in retirement-savings accounts (9%)
- purchase of a new or second home (7%)
- college expenses or student loans (5%)
Rule 10b5-1 Trading Plans
In the Nov. 11 issue of its newsletter Compensation & Benefits Digest, the Ayco Company discusses insider-trading law and Rule 10b5-1 trading plans that can be set up to prevent accidental insider trading. Ayco reports that among the 2,000 Section 16 insiders, including nearly 350 CEOs, for whom it provides financial-planning services, about 24% of the CEOs and 21% of other insiders (including directors) have had 10b5-1 plans during the past two years. For more on Rule 10b5-1 trading plans, including best practices, see the related FAQs and articles at myStockOptions.com.
Director Stock Compensation
For its 2016 Director Compensation Report, the consulting firm Frederic W. Cook & Co. surveyed 300 public companies in the financial services, industrial, retail, technology, and energy sectors. The firm's key findings include the following:
- Among all of the surveyed companies, on average more than half (57%) of total director compensation is paid in the form of equity awards. In general, the larger the company, the greater the percentage of stock compensation for directors.
- Most of the surveyed companies (more than 80%) grant only restricted stock/RSUs to directors (no stock options).
For more on the issues raised by director stock compensation, and for other survey data, see the related FAQ at myStockOptions.com.