May 16, 2022
Trends in Granting Equity During Rocky Times
A recent Pearl Meyer Quick Poll survey, “Trends in Granting Equity,” looks at whether and how companies are changing up their usual equity practices in light of retention concerns, stock market volatility, inflation and other external pressures. The survey reflects responses from 187 companies, and here are some interesting findings:
– About 28% of respondents went deeper into their organizations with equity grants while almost 21% went deeper into the salaried employee group.
– Almost 45% increased their 2022 burn rate, with almost 10% increasing this rate 20% or more. Although most organizations did not go deeper with their equity grants, many have higher burn rates due to depressed stock prices and increasing competition for talent. It will be interesting to see what impact 2022 equity burn rate decisions will have on the ISS 2023 burn rate tables.
– Of the approximately 34% that increased senior leadership team equity values, the increases were spread out somewhat evenly from up to 5% to 20% or more.
– About 10% increased the use of restricted [stock units] by 15% or more, which is a meaningful change. Interestingly, of the companies that indicated making a change, 52% increased by >=25%.
– A little more than a third of companies raised the value of equity grants for new hires, an outcome we expected to see. Similar to the increase in grant values to existing members of senior leadership, many organizations did increase the value provided to new hires in order to compete for talent.
– A little less than two thirds (64.7%) of companies do not use rTSR [relative total shareholder return metric] in their incentive plans. We expected the results to show 50% or less.
As Pearl Meyer flagged, the equity burn rate decisions this year may potentially impact ISS burn rate tables next year. To make sure your board is thinking through all of the risks, benefits & consequences of your compensation decisions, register for our upcoming “Proxy Disclosure & Executive Compensation Conferences” – coming up virtually October 12-14. Among other critical topics, our agenda includes:
– “Navigating ISS & Glass Lewis” – featuring Davis Polk’s Ning Chiu, Glass Lewis’ Courteney Keatinge and ISS’s Rachel Hendrick.
– “The SEC All-Stars – Executive Pay Nuggets” – with Skadden’s Brian Breheny, Compensia’s Mark Borges & MoFo’s Dave Lynn.
In addition, join us for the “1st Annual Practical ESG Conference.” For both of these events (which can be bundled together for a discount), our seasoned and diverse speakers will be sharing practical guidance in a fast-moving format. Sign up online, email sales@ccrcorp.com, or call 1-800-737-1271. Sign up today for the best rate, because our “Early Bird” pricing ends June 10th!
– Emily Sacks-Wilner