Transparency

Shareholder transparency, one of executive comp’s most appealing themes

In its 2009 Top 250 Report, the firm Frederic W. Cook & Co. noted that the “most interesting trends” among equity compensation are in long-term performance awards.

Public in search of greater transparency

Popular metric: total shareholder return

It found that the use of performance shares continues to rise steadily (to 63%) among the 250 surveyed companies, though the use of performance units seems to be declining.

By far, most of the companies (59%) use a profit metric (e.g. earnings per share, EBITDA) in their performance award goals; the next most popular metric (35%) is total shareholder return, followed by capital-efficiency goals (e.g. return on equity, assets, or capital).

The vast majority use no more than two performance goals, and half of the companies use just one.

A three-year performance period is most common (72%).  At 52%, results must exceed the stated performance goal by at least 200% for the maximum payout to be earned, though at some companies the threshold is as high as 350%.

Use of performance shares rising steadily

In its 2009 Top 250 Report, the firm Frederic W. Cook & Co. noted that the “most interesting trends” among equity compensation are in long-term performance awards. It found that the use of performance shares continues to rise steadily (to 63%) among  the 250 surveyed companies, though the use of performance units seems to be declining.

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