Stock options have been granted to executives at a regional airline for many years. After losing two senior executives to competitors recently, the airline’s board decided to award performance shares in order to provide current year income on vested shares through dividend equivalents. Dividend equivalents are payments of cash or additional company stock an executive receives after the units vest. While stock options do not pay dividends, dividend equivalents can offer executives the flexibility to increase or supplement their income. This example explains the benefits and how they work.
If you’re as much into stock plan education as we are, you’re probably also really into survey data. That makes today a good day for both of us at this blog. We have been perusing the 2015 Global Equity Incentives Survey by PricewaterhouseCoopers and the NASPP. The survey presents questionnaire data from 245 multinational companies with employees in 75 countries. The researchers found that the use of equity awards by the surveyed companies generally continued to grow in 2014 and 2015, after falling in 2009–2011 and rebounding in 2012. With this growth in the use of equity has come an expansion in stock plan education and communications.
As the year winds down, there are a few dos and don’ts that may impact how your participants plan to exercise vested stock options before year-end. In order to make sure employees get the most value out of their equity awards, it may be helpful to provide some considerations for equity compensation planning.
Whoever coined the phrase “cash is king” wasn’t talking about executive pay, which as you know has become increasingly weighted toward equity compensation. Has the complexity of executive compensation trumped clarity in executive financial planning? That’s the challenge for today’s C-suite executives. The longer executives have worked for the company, the more likely they have accumulated various combinations of executive compensation and rewards. Over the course of a decade or two, the mix can include stock options, restricted stock grants, stock appreciation rights, employee stock purchase plans or performance arrangements. Few executives would say they have a good grasp on the particulars of their company stock holdings, tax treatments and a game plan to optimize these rewards.
Communicating an equity-based compensation program requires effective collaboration of multidisciplinary internal stakeholders (e.g., finance, human resources, legal) and external service providers (e.g., brokers, transfer agent, software vendors). Thinking of each of these parties as members of your stock plan communication team will help to break up the responsibilities and coordinate efforts to work towards a common goal – increasing participant satisfaction with the equity plan.
Board members bring of wealth of talent and experience to the companies they serve, but often have no practical exposure to the basic building blocks of effective compensation design. Before new compensation committee members jump into aligning incentives with company strategy, discussing “best practices” or considering accounting and tax implications, it can be very beneficial to review the concepts typically used by compensation professionals in incentive design.
On April 30, 2015, the Court of Chancery of the State of Delaware rendered an important case decision in a procedural matter dealing with the equity compensation of non-employee members of a company’s board of directors. As we discuss in this blog, companies may wish to evaluate their equity compensation plans and ascertain whether their process regarding non-employee director equity awards needs any adjustments in light of Calma.
What may seem like the simplest award structure to you as a stock plan administrator, can feel like a foreign concept to participants. A critical element to equity plan success is participant comprehension and engagement, and the most effective way to increase these key elements is employing an online participant portal.
Preparing for an acquisition can feel a bit daunting for most. There are lots of moving parts and decisions to be made – not only about the course of action for the company and its employees, but also for the equity awards of both the parent and the target company. While many of these decisions and actions will be made once the acquisition process has begun, there are a few steps you can take in advance to better prepare your equity compensation plan for a corporate action.
Whether you are a U.S. based or global company, one question remains constant – is your equity compensation enhancing employee loyalty and motivation? Participant perception is such an integral element to stock plan success, and it is also one that remains difficult to quantify. Fidelity Stock Plan Services conducted a third installment of its participant research survey and reported the results in comparison to survey results from years past. The findings illustrate the trends in participant attitudes toward equity compensation plans.