The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s an excerpt from this interesting article from Semler Brossy:

An alternative to this approach is something called a “Combination Price-Vested Equity” (CPVE) vehicle. This vehicle is a full-value share that acts like a stock option; however, it also directly incorporates operational goals by requiring a minimum threshold level of financial performance (e.g., return on capital, operating margin, earnings per share) to gain access to the share price accelerators. CPVEs enable compensation committees to appropriately balance three key factors in today’s executive compensation environment: i) performance orientation, ii) executive retention, and iii) sustainability, all within a single vehicle.

CPVEs are a grant of performance-based restricted stock which incorporate two performance requirements over a period of four years. The primary metric is a financial measure that requires the organization to meet a minimum level of performance over a four-year period. If the primary financial requirement is not met, then no shares are earned. However, once the hurdle is achieved, executives have the opportunity to benefit from share price appreciation.