The Employee Ownership Update
April 15, 2009
Results in from NCEO ESOP Executive Compensation SurveyResults are now in from the NCEO's survey of executive compensation in ESOP companies, the only such survey available. We had a very strong response, with 317 companies providing detailed answers. The data look at base pay, incentive and stock-based pay, stock-based awards, and qualified retirement plan contributions to create a picture of total compensation for CEOs, CFOs, COOs, top sales/marketing executives, and top vice-presidents.
The data show that pay for ESOP executives remains fairly modest. The median base compensation for CEOs is $200,000 and total compensation $292,000. While 71% get cash-based incentive pay, only 15% receive any kind of stock-based awards outside of the ESOPs. The median company contribution to the ESOP was $17,900. CFOs had median cash compensation of $120,000 and total compensation of $150,000. Thirteen percent received some kind of stock awards.
The data also cover how awards are determined. In 64% of the cases, boards decide alone, while 30% use compensation consultants. Eighteen percent have independent board compensation committees.
Detailed custom reports on the survey results can be ordered now and will be available by the end of the month. Companies can either purchase customized reports by selecting any two of the key variables the survey includes, such as industry, size, S or C status, majority or non-majority ESOP status, and region. The data include all of the elements of compensation for all of the officers described above. Customized reports cost $150 for NCEO members and $300 for non-members. NCEO members can buy the entire data set for $500. For details, contact Loren Rodgers at email@example.com or (510) 208-1307. Further details are at this link.
New NCEO Report Looks at Equity Issues in the DownturnA new NCEO issue brief, Equity Compensation in a Down Market: Repricing, Accounting, ESPP, and Employee Communications Issues, examines issues that arise in dealing with equity compensation plans in a down market. Contributors to the 63-page publication include leading experts on the topic from around the United States.
Some of the key concepts that emerge from the publication include:
The issue brief also explores how best to communicate changes in equity programs and the impact of the economy on existing programs. Equity Compensation in a Down Market: Repricing, Accounting, ESPP, and Employee Communications Issues is available to NCEO members for $15 and non-members for $25.
- The most popular option exchange programs trade options for cash (48%) and options for stock (36%).
- Only 31% of companies allow directors to participate in options exchanges, and 58% allow CEOs.
- The median options-for-options exchange ratio is 1.4 to 1.
- Most exchange offers are treated as tender offers under SEC rules and must be carefully designed to be compliant with those rules.
- Changes in market volatility in the last year have made prior valuation assumptions for many companies outdated. No method is perfect for valuing new awards. The issue is not just one for accountants to worry about. The valuation of options becomes a human resources issue, especially when exchange ratios are based on assumptions about the present value of new awards.
- In some jurisdictions outside of the U.S., an exchange program will trigger taxation.
- Companies whose stock prices have fallen sharply are often finding they do not have enough authorized shares to satisfy the number of shares needed for exercise in their employee stock purchase plans (ESPPs).
Great Game of Business Offers $315 Off Conference Rates for Readers of This ColumnThe NCEO is a sponsor of The Gathering of the Games, the Great Game of Business' annual conference May 6-8 in Saint Louis. The conference is a hands-on, nuts-and-bolts meeting on how to do open-book management effectively. Conference details are at www.ggob.com. It's one of the best conferences around. The NCEO has worked closely with the Great Game people for over 20 years, and I am certain that you will leave the meeting with a lot of good ideas for how to create more effective employee involvement.
The Great Game has extended a special offer to readers of this column. You can register for the early bird discounted price of $695 (reg. $795), and if you mention the NCEO can get free entrance a pre-conference session ("The Game" or "Mini-Games," a $215 value). To get this special rate, you must contact Kristin Binford directly at (417) 829-8270 and mention the NCEO.
Author biography and other columns in this series