New NCEO Survey Looks at Use of Equity Compensation Plans in Private Companies
NCEO founder and senior staff member
Data on equity compensation practices in closely held companies is hard to find. What data sets that do exist are generally based on client responses or are limited to the high-tech sector. With support from E*Trade Business Solutions, Two-Step Software, The Great Game of Business, and Allecon Stock Associates, the NCEO has now completed a survey that gathers responses from 80 non-ESOP companies and 54 ESOP companies, representing a wide range of industries and company sizes.
We found that 67.5% of the non-ESOP companies used stock options, with 27.5% using restricted stock and 23.0% using stock appreciation rights or phantom stock. ESOP companies were much more likely to rely on stock appreciation rights or phantom stock (56.9%), with 41.2% using options, and 26.1% using restricted stock.
While almost all executives receive equity awards in non-ESOP companies, 29.3% make hourly employees eligible as well and 61.3% make salaried employees eligible. Companies in the West are more likely to make hourly employees eligible (50% do so), as are technology and health care companies (40%). Eligibility is not the same as actually receiving awards, but 56.3% of companies actually make grants to 75% of those eligible. ESOP companies reported a broad distribution of equity, but it is not clear if ESOP respondents misread the question (which asked only about non-ESOP equity), so the results are somewhat suspect.
The results for how much people actually get were surprisingly modest. The tables below show details:
Last year's equity compensation as a percentage of base pay (non-ESOP companies)
| 0-5% | 6-10% | 11-15% | 15-20% | Over 20% | |
|---|---|---|---|---|---|
| Executive (n=75) | 49.3% | 16.0% | 8.0% | 9.3% | 17.3% |
| Managers (n=69) | 65.2% | 17.4% | 7.2% | 8.7% | 1.4% |
| Salaried (n=68) | 75.0% | 11.8% | 5.9% | 7.4% | 0.0% |
| Hourly (n=57) | 89.5% | 7.0% | 1.8% | 1.8% | 0.0% |
Last year's equity compensation as a percentage of base pay (ESOP companies)
| 0-5% | 6-10% | 11-15% | 15-20% | Over 20% | |
|---|---|---|---|---|---|
| Executive (n=50) | 22.0% | 18.0% | 12.0% | 8.0% | 40.0% |
| Managers (n=49) | 32.7% | 22.4% | 14.3% | 12.2% | 18.4% |
| Salaried (n=49) | 49.0% | 16.3% | 18.4% | 8.2% | 8.2% |
| Hourly (n=47) | 55.3% | 14.9% | 14.9% | 6.4% | 8.5% |
The survey asked a variety of other questions as well, including plan rules, overhang, and formulas for allocating awards. Data can be broken down by size, industry, region, and ESOP vs. non-ESOP. Access to the complete data set is available from the NCEO for $150 to members and $300 to non-members. Contact Loren Rodgers at [email protected] for details.