Survey of Large Private Companies Explores Equity Plan Use

As part of a broader survey of 300 privately held companies with $100 million in revenue or more, WorldatWork and Vivient Consulting report that only one-third of the surveyed companies have some form of long-term incentive plan. Of this one-third, one-third have stock options, 19% have restricted stock, and 14% have stock appreciation rights. About 25% of these companies have more than one plan, so about half of the one-third of private companies with long-term plans have some form of equity compensation, or roughly 17% of the total sample. Of this group, about half have 10% or less of their equity available for equity compensation, while 35% have 10% to 25%, and 14% have 25% or more. Sixty percent of the companies use independent appraisers to determine value.

Companies provide liquidity in different ways. For options, half allow exercise on a change of control, half allow it at retirement, and a third have some kind of internal market (some companies have more than one way to provide liquidity). Restricted stock is less likely to be paid out at retirement. The median ownership by CEOs where there are equity plans is 5%, all other officers another 3%, and everyone else 10%. Generally, companies limit eligibility to CEOs and top officers, but 14% provide it to at least some hourly employees and about the same percentage to non-management employees other than hourly.

The survey was of WorldatWork members with revenues from $100 million to $5 billion, so the results may not be typical for most closely held companies. Complete results are available at WorldatWork's Web site: go to www.worldatwork.org and enter "incentive pay practices" in the search box.