U.S. execs are seeing long-term incentive (LTI) grants rising in their 2010 compensation packages but unlike before, there are strings attached.
According to analysis of 2010 Form 4 Securities and Exchange Commission (SEC) filings of the Fortune 250 conducted by Hewitt Associates, an increasing number of companies are tying LTIs to specific performance goals, which must be met before the grants are delivered. Hewitt’s research shows that the prevalence of LTI performance plans has steadily increased over the past seven years, from 18% in 2003 to 35% in 2009.
The total median economic value delivered through LTI grants increased 23% in 2010 from 2009, nearly reversing the 20% drop in value that took place during the economic downturn in 2008 and 2009. As markets recovered in 2010, companies could award fewer shares through LTI grants to meet their targeted value goals.
“As stock prices declined, many companies were forced to reduce their LTI grants in 2008 and 2009. Companies that review 2009 proxy data will see this trend continuing. But when you analyze Form 4 data, which provides a more accurate picture of what’s really happening in the market, you’ll see that companies have started beefing up LTIs again in 2010,” said David A. Hofrichter, principal and business development leader of Hewitt’s executive compensation consulting practice.
