The NASPP Blog

Frederic W. Cook & Co. recently issued The 2009 Top 250 Report, on long-term incentive grant practices currently in place for executives of the 250 largest U.S. companies in the Standard & Poor’s 500 Index. Here is a quick summary of what I found most interesting in the report.

Nothing Very Newsworthy for Stock Options or Restricted Stock

Stock options continue to be the predominant form of incentive compensation used by the companies surveyed; however, stock option usage has declined gradually each year since 2003. For example, from 2006 to 2009, stock option usage declined by 10% (from 88% to 77%).

Restricted stock continues to be another leading form of long term equity compensation with (57%) of companies issuing or beginning to issue restricted stock last year.

Most Interesting Trends are in Performance Awards

• Performance shares increased slightly in usage by survey respondents (63%, up from 60%).
• The use of performance units (cash or stock-settled) has been stagnant, and the survey indicates that up to ten companies have or will be eliminating performance units from their compensation programs. (I wonder why? This is disappointing to read.)
• The majority of companies surveyed (57%) use a profit metric, such as EPS or net income, as the basis for their performance award payout. Total shareholder return came in a distant second (35%).
• Half of the survey respondents indicated that they use only one performance measure and the majority of the remaining respondents indicated that they use two performance metrics to determine their award payout.
• Most survey respondents (72%) are using a three-year performance period.
• Over half of the survey respondents (52%) set a maximum payout level under their plan at 200% of target. The other half of respondents are evenly split between payouts ranging from 100 to 150% and 250% and beyond.

The takeaway I got from this survey is that the gap between the use of performance award programs and the use of stock options as a long term incentive is narrowing, and odds are that this trend will continue.

Only 6 days until the 17th Annual NASPP Conference!
The Conference is sold out, but you can still sign up for the live nationwide video webcasts of the 4th Annual Proxy Disclosure Conference and the 6th Annual Executive Compensation Conference–you get both webcasts for the price of one. 

You can hear any–and all–of the NASPP Conference sessions by purchasing the downloadable audio.  Purchase just the sessions you want or save by purchasing one of the package deals.

Registration is also still open for the Restricted Stock Essentials.

-Robyn