The April 15, 2009 Employee Ownership Update is online and discusses the following:
- Results in from NCEO ESOP Executive Compensation Survey
- New NCEO Report Looks at Equity Issues in the Downturn
- Great Game of Business Offers $315 Off Conference Rates for Readers of This Column
The Update discusses the results of the NCEO's survey of executive compensation in 317 ESOP companies:
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.
It also discusses some highlights from a newly released NCEO issue brief that explores equity compensation plan issues in a down market:
- 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- Changes in market volatility in the last year have made prior valuation assumptions for many companies outdated.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).