How Competitive is your Equity Plan: Ways to Measure

By Shylette Joven.  Your company has spent countless hours and resources developing an effective equity compensation plan, but markets, regulations and executive expectations change – creating an ever-evolving landscape. A best practice for organizations is to conduct a review of market data to measure the competitiveness of its equity compensation program on an annual basis.  The data gathered helps the organization determine any changes needed in the equity compensation program, as well as the overall total rewards program, to keep them competitive and aligned to the market. Companies typically either engage in an equity compensation survey or collaborate with an executive compensation consultant in order to gain market insights. An equity compensation program is a great tool to help an organization’s strategy to attract, motivate and retain employees, but it is important to understand how attractive the plan appears compared to your peers.

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One way to measure the competitiveness of your equity plan is to participate in equity compensation surveys. Participating in multiple surveys is beneficial to enhance the reliability of the results.  Depending on the length of the survey questions, amount of data that needs to be submitted (i.e. grantees/types of grants) and the accessibility of that data, a stock plan/equity administrator can spend a few hours to days or weeks completing the surveys. Samples of highly recommended equity compensation surveys include:

  • Global Equity Organization (GEO) Global Equity Insights Survey – a global survey aiming to analyze current market practice of equity-based compensation and to examine the prevalent equity-based plan designs across the world’s most important economic regions. Every company with long-term incentive plans in place can participate in the survey and profit from the comprehensive market practice database. Survey participants will get access to valuable insights on global and regional level. Your organization does not have to be a listed GEO member to participate.

 

  • The National Association of Stock Plan Professionals (NASPP) Domestic Stock Plan Administration Survey – a joint survey co-sponsored by Deloitte Consulting LLP which is the industry’s longest-running and most comprehensive examination of stock plans in the United States and allows for year-over-year comparisons of trends in the following areas: stock plan administration and communication practices, ESPP design and administration, insider trading compliance, ownership guidelines and non-employee director equity plans.

 

  • Radford Global Technology Survey – as part of Radford’s global survey platform, this survey provides comprehensive and consistent compensation intelligence for all forms of pay and employee levels around the world, including base salaries, bonus targets, equity awards and more.

Another way to measure the competitiveness of your equity plan is to hire an equity compensation consultant to assist in gathering the data, analytics and market comparisons.  Equity compensation consultants can also help in creating the equity vehicle mix and new-hire and ongoing grant guidelines for your equity compensation program.  These consultants can provide a broad scope of guidance for plan design and management. Here’s a sample list of equity compensation consultants:

  • Compensia – offers consulting services in equity/long-term incentive strategy for plan design, equity allocation strategy, scenario modeling, etc. to ensure market competitiveness of your equity plan. For more information, visit: http://www.compensia.com/services.html

 

  • Continental/FRS Plan Administration – full-service stock option and equity compensation consulting firm. Helps in designing a market competitive equity compensation or stock option plan from the ground up or redesigning one to accommodate changes in your company’s situation. Continental/FRS Plan provides compensation guidance, comparison chart for equity types, etc. For more information, visit: http://www.frsequitystrategies.com/FRS_2008/Con_PlanDesign.php

 

 

It may be more cost effective for your organization to participate in an equity compensation survey to help with the internal annual review of your equity plan administration and equity grant guidelines. Although, hiring a consultant as a way to measure the market competitiveness of your equity plan can offer benefits to your organization as well. A good first step is to compile a list of key elements that your company deems important factors to benchmark across market data.  This may help to decide which method best suits your end goal.

SEC disclosures are a great resource for information that can help you benchmark the competitiveness of your equity plan against peers, but combing through filings is time consuming. Certent’s Disclosure Research platform provides unlimited access to more than 20 million disclosure documents and the ability to filter searches using more than 40 criteria. Be sure to register for your 30-day free trial and start benchmarking today!

For more resources on equity compensation management, be sure to download a few of our white papers and watch our thought leadership presentations .

Shylette Joven