If you're as into stock plans and equity comp as we are, you're probably also really into survey data and statistics. That makes this blog entry a good one for both of us.
While the rise of restricted stock/RSUs and performance shares, along with the relative decline of stock options, has been well documented for many years, it is always interesting to get a nuanced picture of how all three grant types are used in tandem now. As we predicted a while ago, stock options have not disappeared but are often being granted to supplement full-value awards such as restricted stock and performance shares, especially in long-term incentives (LTIs) designed for executives.
That's where the following new survey comes in. For its study 2017 Trends And Developments In Executive Compensation, the research and consulting firm Meridian Compensation Partners surveyed 118 companies to uncover the current usage of equity comp in LTI vehicles for executives. Meridian found that for their senior executives, 90% of the surveyed companies use two or three types of long-term grants (though for grants to employees at lower levels, the use of just one type is more common).
Meridian discovered the following about the prevalence and weight of restricted stock, performance shares, and stock options in LTI vehicles for executives.
| Type of award | % of companies | Performance awards (dollar weight in total LTI value) | Stock options (dollar weight in total LTI value) | Restricted stock (dollar weight in total LTI value) |
| Performance awards, stock options, and restricted stock | 22% | 44% | 27% | 29% |
| Performance awards and restricted stock | 55% | 58% | — | 42% |
| Performance awards and stock options | 11% | 51% | 49% | — |
| Stock options and restricted stock | 2% | — | 28% | 72% |
| Performance awards only | 8% | 100% | — | — |
| Restricted stock only | 0% | — | — | 100% |
| Stock options only | 2% | — | 100% | — |
| Overall (averages) in 2017 | 100% | 56% | 13% | 31% |
| Overall (averages) in 2016 | 100% | 55% | 16% | 29% |
An FAQ on myStockOptions.com presents numerous other surveys which show that many companies use a variety of grants in tandem, including restricted stock/RSUs and performance shares.
Restricted Stock, Performance Shares, and Stock Options can be substantially enhanced in value by two things:
1) The volume granted are a function of defined performance, so employees know what funded these grants
2) The value of the stock, shares or options are updated on a regular basis. This Forbes article provides more background: http://www.forbes.com/sites/fotschcase/2015/12/08/whats-your-ownership-worth-check-the-scoreboard/
Posted by: Bill Fotsch | 03 July 2017 at 01:35 PM