May 17, 2018
Director Pay: Vesting Doesn’t Make Sense?
– Liz Dunshee
This blog from Meridian’s Bob Romanchek notes a “small but emerging trend” of granting fully-vested stock to directors – with a holding requirement. Here’s an excerpt:
The whole concept of vesting — it really doesn’t make sense for outside directors. They are elected; they’re not employees. Also the vesting term has changed. About five years ago, the majority practice was three-year vesting. When we had classified boards with staggered three-year terms, three-year vesting made sense. Over the last couple of years, the practice has changed very quickly. The majority of board directors are elected every year – and the equity vesting schedule now matches that.
In addition, there are now about 10 to 15 percent of companies that provide outright director stock grants with no vesting whatsoever. I think that’s an increasing trend – grant shares outright, with holding requirements.
The blog also addresses some other trends – such as lead director pay, shareholder ratification of director pay limits and proxy advisor policies on “excess” director compensation.