The Advisors' Blog

While special retention awards continue to be frowned upon by proxy advisors and investors, they do tend to serve their stated purpose of retaining executives during times of uncertainty – and companies are starting to address investor concerns by adding a long-term performance component to these types of grants. That’s according to a recent analysis by Willis Towers Watson of retention awards in the S&P 1500 from 2017-2021. Here’s more detail:

– 37% of S&P 1500 companies have granted a retention award at least once in the past 5 years.

– 33% of retention grant packages in 2021 included a long-term performance award, the most in any year in our study and a +10 percentage point increase from the prior year. Time-vested restricted stock remained the primary vehicle, being included in 58% of retention packages.

– 76% of executives who received a retention award during 2017 – 2019 remained with the company through the duration of the retention period.

– 11% of of the companies that granted a retention award during the study period saw the award flagged as part of an “Against” say-on-pay ISS recommendation.

The notion of including a performance component in retention awards is something that Rachel Hedrick of ISS also shed light on at our recent “Proxy Disclosure & 19th Annual Executive Compensation Conferences.” Here’s an excerpt from the transcript of our “Navigating ISS & Glass Lewis” panel – with Rachel, Glass Lewis’s Maria Vu, and Davis Polk’s Ning Chiu:

As Maria alluded to, our clients want to see the structure of these awards, particularly, special awards, be more rigorous than the long-term incentive program because if the long-term incentive program is there to incent performance and behavior over the say three year performance period, then the hope is that an additional retention or special award is going to go beyond that and require additional strong performance or some sort of special performance factors in order to be earned.

This session – and the rest of the Conference – was full of useful nuggets. If you attended, make sure to bookmark the archive so that you can refer back to it as you head into proxy season. If you weren’t able to attend the live event, you can still get access to the archived videos & transcripts by emailing sales@ccrcorp.com.

– Liz Dunshee