The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here is a recent report from Frederic W. Cook & Co. entitled “The 2008 Top 250 Report Prevalence of Long-Term and Stock-Based Grant Practices for Executives at the 250 Largest Companies.” Key findings from the report include the following:

– Stock option usage continues to decline, although options remain the single most common long-term incentive vehicle.

– Stock options are being replaced primarily by full-value shares that are earned by continued service and achievement of performance contingencies (performance shares).

– Full value shares with performance contingencies (performance shares) are now as common as full-value shares that vest by continued service alone (restricted stock).

– Long-term performance awards (performance shares and performance units) are now almost as common as stock options and represent nearly as much of CEO’s total long-term incentive values as stock options.

– Imposing performance requirements on the vesting of stock options increased in 2007, although most other stock option design variations (reloads, discounts, and tandem grants) disappeared in practice.

– Median CEO long-term incentive values continued to increase, but 75th percentile values leveled off.

– The prevalence of stock ownership guidelines for executives continues to increase with approaches combining mandatory share ownership and retention ratios showing the fastest growth.