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The New ESOP Executive Compensation and Private Company Equity Compensation Surveys

An NCEO Issue Brief

by Matt Keene, Camille Kerr, and Corey Rosen

This is one of our archived publications; specialized publications that have been removed from our main publication list and are not being updated, but are are still available for purchase, although sometimes only in digital form.

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For ESOP companies and private companies administering equity plans, relevant, affordable compensation data is often difficult to find, and it may be available only for particular industries. Often, these types of industry surveys do not address the unique compensation issues that employee ownership companies face. The NCEO's 2011 surveys of executive compensation in ESOP companies and of equity compensation in private companies fill this gap. This issue brief summarizes the results of these surveys, including illustrative graphs and tables.

Publication Details

Format: PDF, 18 pages
Dimensions: 8.5 x 11 inches
Edition: 1st (March 2012)
Status: Available for electronic delivery

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Introduction: Using Surveys to Inform Compensation Decisions at Employee-Owned Companies
Camille Kerr

The 2011 NCEO Survey of ESOP Company Executive Compensation
Matt Keene
Executive Compensation in Today's Environment
Practicing Good Governance
Developing a Compensation Philosophy
Mix of Pay
Incentive Pay
How to Obtain the Full Survey Results

The NCEO Private Company Equity Compensation Survey
Corey Rosen
Survey Design Issues
Company Survey Results
Models for Sharing Equity
How to Obtain the Full Survey Results


From "The 2011 NCEO Survey of ESOP Company Executive Compensation"

Having covered how the LTIP units are granted and how they are vested, let us turn to what is being granted. The 2011 Survey shows that ESOP companies continue to favor SARs and phantom stock, with SARs being the most popular. Considering all responding companies, 9% of the CEOs received SARs and 6% received phantom stock units. This is a small but noticeable increase relative to the 2009 Survey, where 4% of CEOs had SARs and 5% had phantom stock. Table 4 provides more extended data on stock incentive grants at ESOP companies.

What is driving this uptick in SARs? It is hard to say with any certainty, but there are many possibilities. For one, the companies participating in the 2011 Survey were larger as a whole, by revenue, than the 2009 respondents. Larger companies tend to grant LTIPs, and particularly SARs, with more frequency. See table 5, derived from the 2011 Survey, which shows the percentage of companies in each revenue class that grant SARs to executives.

A large percentage of responding companies for both surveys are S corporations, and the Section 409(p) anti-abuse rules can significantly reduce the availability of LTIP awards for smaller companies. Section 409(p) is more driven by the number of ESOP participants than it is by company revenue, but revenue and employees tend to move in the same direction, so companies with less revenue likely face stronger Section 409(p) headwinds.

The prevalence of phantom stock was pretty consistent between the two surveys, but SAR grants increased more significantly. In the wake of the recent recession, there is more focus on aligning executives' efforts with company and shareholder outcomes, and in my experience, external ESOP trustees view appreciation-based awards as generally providing better alignment than full-value awards such as phantom stock. It is hard to say for sure, but the uptick in SAR prevalence in the 2011 Survey is likely a combination of this increased focus on governance, coupled with more representation in the 2011 Survey from the larger companies that are more likely to have external independent trustees.