December 21, 2021
Stock Ownership & Retention Guidelines: S&P 100 Getting More Stringent
A recent Willis Towers Watson memo looks at how S&P 100 stock ownership & retention guidelines have changed over the past 6 years. Here’s an excerpt from the firm’s summary, with a few key stats:
– Stock Ownership Guidelines: Company stock ownership required for S&P 100 CEOs is climbing to a value of six times salary or higher. While the most common multiple for S&P 100 CEOs has remained six times salary since 2015, CEO multiples greater than that have gained traction and appear on pace to become the majority practice in the near future. Companies using a CEO multiple greater than six times salary represented 27% in 2015, 33% in 2019 and 42% in 2021. 90% of the S&P 100 use a salary multiple approach for stock ownership guidelines.
– Stock Retention Requirements: Stock retention requirements have also seen significant growth since 2015. A significant majority of companies (70% in 2021) now utilize retention requirements in conjunction with their stock ownership guidelines, signaling an increased commitment to both total ownership value and long-term consistent holdings with less strict adherence to the time needed to comply with policies. One driver of these policies occurred in September 2019 when the Council of Institutional Investors (CII) suggested that ownership guidelines and retention policies should be included as part of an executive compensation program focused on building long-term (at least five years) shareholder value. Prior to this suggestion, in 2015, Institutional Shareholder Services (ISS) began to account formally for these policies when evaluating and scoring a company’s equity compensation plan.
– Liz Dunshee