The survey was conducted from April 21st to the 28th. In total, 108 Subscribers provided responses. A summary is outlined below and comprehensive results of the survey can be found here.
Long-term Equity Awards
- Average CEO Award Makeup. Subscribers reported their use of equity vehicles are broadly in line with market trends.
- For CEOs, approximately 60% of the average total equity award is performance shares, 28% is RSUs, and 22% is stock options.
- As expected, the proportions shift going down the employment ladder. Vice Presidents have approximately 40% of equity in performance shares, 50% in RSUs, and 20% in stock options on average.
- Prevalence of Equity Vehicles.
- Nearly 98% of Subscribers grant performance shares to the CEO and 94% grant performance shares to VPs.
- Approximately 73% grant RSUs to CEOs, but they get more common moving down – 84% grant RSUs to VPs.
- Stock options are the least popular but are still widely used – 62% grant them to the CEO and about 52% grant them to VPs.
Treatment Upon Termination
- Companies were most likely to award all types of equity vehicles in full in the event of death or disability.
- Retirement or involuntary termination without cause (especially with a change in control) were a broad mix of prorated or forfeited (for both performance shares and RSUs, the two were nearly 50/50).
- Approximately 92% of respondents indicated that a combination of minimum age and years of service was required to be considered “retirement-eligible.”
- Anecdotal comments indicated it was common to see provisions such as “55 years of age and 10 years of service OR 65 years of age.”
- Approximately 92% of respondents indicated that a combination of minimum age and years of service was required to be considered “retirement-eligible.”
- Voluntary resignation and termination for cause almost exclusively resulted in forfeiture for all equity vehicles.
- One notable emerging trend was a requirement that shares granted within the last year were forfeited, but longer-term awards would be prorated. This avoids incenting executives to retire immediately after accepting a grant.
Grant Practices
- Subscribers almost universally provided equity grants to employees at the VP level (99%) and were very likely to do so for employees at the director level (87%). Below the director level, approximately 13% of Subscribers grant equity.
- More than 93% determine equity eligibility by the employee’s job level. However, the comments indicated that some employees with critical skills may receive equity for retention purposes.
- At the lowest levels of equity eligibility, time-based RSUs are the most common vehicle (approximately 93%). Stock Options were granted by 17% of Subscribers, and PSUs by 16%.
Stock Ownership
- More than three quarters of Subscribers (77%) maintain stock ownership guidelines below the NEO level. The guidelines are most likely to be expressed in dollar value (86%). Comments indicated this was often determined as a multiple of salary.
- For stock ownership guidelines, the survey assumed that vested shares and shares held directly by the employee in question (in a variety of accounts) would count toward ownership thresholds. Subscribers also counted:
- Shares held indirectly in a trust or by a direct family member (75%)
- Unvested time-based RSUs (72%)
- Unvested shares in a 401(k) (41%)
- Comments highlighted that Subscribers would also apply deferred shares toward the guidelines. For unvested shares, Subscribers indicated that a proportion of shares may be applied (most typically 50%).
Thanks again to all Subscribers who took the time to respond to this survey. If you have any questions or would like to request a survey, please contact Andrew Maletz at [email protected].
