The Advisors' Blog

In recent years, it’s felt like outside advisors pretty much always have a few clients battling significant stock price volatility. From time to time, those companies decide they need to make off-cycle retention grants to one or more executives, but they may have fewer headaches to deal with if they can maintain the competitiveness of their pay program while avoiding special, one-time awards. This NACD insight from Semler Brossy discusses how annual and long-term incentive plans can be adapted and share pools can be managed in a volatile environment. Specifically, it suggests that companies consider for both annual and LTI plans:

– Changing metrics
– Altering performance periods
– Widening goals or payout ranges
– Adjusting the LTI vehicle mix

If the company has share pool concerns due to the volatility, it recommends considering the following strategies to reduce the number of shares utilized for equity grants:

– Reduce the number of participants
– Reduce the dollar value of the annual grant per participant (e.g., focus on the number of shares instead of the dollar value)
– Substitute performance cash for a portion of equity
– Delay the timing of awards

– Meredith Ervine