In a recent survey released by Buck Consultants, most companies report that they will not be delivering the same equity values to their executives in 2009 - a consequence of decreasing stock prices resulting from the current economic downturn.
The survey, "Taking the Pulse of Equity Compensation," examines measures companies have recently taken or are planning to implement in 2009, with respect to equity compensation programs and executive pay. The survey includes responses from 73 U.S. organizations, with 90 percent of the participants representing publicly traded companies.
"These reductions in value at the time of the grant are occurring because it is very difficult for most companies to increase the number of options or shares granted to offset the decline in each share's value," says Buck Consultants compensation principal Larry Schumer. "However, if a company's share price were to eventually rebound to levels experienced prior to the economic downturn, the gains realized by the executives may actually be greater than the grants given in previous years. This is a complex issue, and companies need to carefully examine the value of equity compensation and how to best deliver it."
The survey results also indicate that 52 per cent of respondents said there was potential for no increases in executive base salary in 2009.
Other significant findings include:
• 43 per cent of respondents expect to decrease participation in stock grant programs; more than half of companies cite significant drop in share price as their reason for this change.
• 31 per cent of respondents expect to somewhat increase the number of options or shares to those receiving grants in 2009, although very few plan to fully restore last year's value.
• Changes vary significantly based on equity compensation practices. For those issuing equity compensation based on number of shares, 60 per cent anticipate no change in awards. For those issuing equity compensation on a dollar-value basis, only 30 per cent expect no changes in awards.
• 45 per cent of respondents are considering a change in equity compensation mix. Twenty-nine percent will increase their use of shares, and decrease use of options - likely due to negative employee perceptions of options since a large majority of existing grants are underwater. Sixteen percent of respondents will increase their use of options, and decrease use of shares - creating the possibility of delivering more future value from the increased number of options granted.
The "Taking the Pulse of Equity Compensation" report can be ordered online at www.bucksurveys.com.
The survey, "Taking the Pulse of Equity Compensation," examines measures companies have recently taken or are planning to implement in 2009, with respect to equity compensation programs and executive pay. The survey includes responses from 73 U.S. organizations, with 90 percent of the participants representing publicly traded companies.
"These reductions in value at the time of the grant are occurring because it is very difficult for most companies to increase the number of options or shares granted to offset the decline in each share's value," says Buck Consultants compensation principal Larry Schumer. "However, if a company's share price were to eventually rebound to levels experienced prior to the economic downturn, the gains realized by the executives may actually be greater than the grants given in previous years. This is a complex issue, and companies need to carefully examine the value of equity compensation and how to best deliver it."
The survey results also indicate that 52 per cent of respondents said there was potential for no increases in executive base salary in 2009.
Other significant findings include:
• 43 per cent of respondents expect to decrease participation in stock grant programs; more than half of companies cite significant drop in share price as their reason for this change.
• 31 per cent of respondents expect to somewhat increase the number of options or shares to those receiving grants in 2009, although very few plan to fully restore last year's value.
• Changes vary significantly based on equity compensation practices. For those issuing equity compensation based on number of shares, 60 per cent anticipate no change in awards. For those issuing equity compensation on a dollar-value basis, only 30 per cent expect no changes in awards.
• 45 per cent of respondents are considering a change in equity compensation mix. Twenty-nine percent will increase their use of shares, and decrease use of options - likely due to negative employee perceptions of options since a large majority of existing grants are underwater. Sixteen percent of respondents will increase their use of options, and decrease use of shares - creating the possibility of delivering more future value from the increased number of options granted.
The "Taking the Pulse of Equity Compensation" report can be ordered online at www.bucksurveys.com.
