Barbara Baksa, Executive Director of the National Association of Stock Plan Professionals (NASPP), summarizes the findings of the 2016 Domestic Stock Plan Design Survey in her blog post.  This survey co-sponsored with Deloitte Consulting LLP contains data from more than 400 companies on stock plan design and granting practices of restricted stock/RSUs, performance share/units, and stock options/SARs.

  1. Full Value Awards Still Rising. This survey saw yet another increase in the usage of full value awards at all employee levels. Overall, companies granting time-based restricted stock or units increased to 89% of respondents in 2016 (up from 81% in 2013). Most full value awards are now in the form of units; use of restricted stock has been declining over the past several survey cycles.
  2. Performance Awards Are for Execs. We are continuing to see a lot of growth in the usage of performance awards for high-ranking employees. Companies granting performance awards to CEOs and NEOs increased to 80% in 2016 (up from 70% in 2013) and companies granting to other senior management increased to 69% (from 58% in 2013). But for middle management and below, use of performance award largely stagnated.
  3. Stock Options Are Still in Decline. Usage of stock options dropped slightly at all employee levels and overall to 51% of respondents (down from 54% in 2013).
  4. TSR Is Hot. As a performance metric, TSR (Total Shareholder Return) has been on an upwards trajectory for the last several survey cycles. In 2016, 52% of respondents report using this metric (up from 43% in 2013). This is first time in the history of the NASPP’s survey that a single performance metric has been used by more than half of the respondents.
  5. The Typical TSR Award. Most companies that grant TSR awards, use relative performance (92% of respondents that grant TSR awards), pay out the awards even when TSR is negative if the company outperformed its peers (81%), and cap the payout (69%).
  6. Clawbacks on the Rise.  Not surprisingly, implementation of clawback provisions is also increasing, with 68% of respondents indicating that their grants are subject to one (up from 60% in 2013). Enforcement of clawbacks remains spotty, however: 5% of respondents haven’t enforced their clawback for any violations, 8% have enforced it for only some violations, and only 3% of respondents have enforced their clawback for all violations (84% of respondents haven’t had a violation occur).
  7. Dividend Trends. Payment of dividend equivalents in RSUs is increasing: 78% of respondents in 2016, up from 71% in 2013, 64% in 2010, and 61% in 2007.  Payment of dividends on restricted stock increased slightly (75% of respondents, up from 73% in 2013) but the overall trend over the past four surveys (going back to 2007) appears to be a slight decline. For both restricted stock and RSUs, companies are moving away from paying dividends/equivalents on a current basis and are instead paying them out with the underlying award.
  8. Payouts to Retirees Are Common. Around two-thirds of companies provide some type of automated accelerated or continued vesting upon retirement (60% of respondents for stock grants/awards; 68% for performance awards, and 60% for stock options). This is up slightly in all cases from 2013.
  9. Post-Vesting Holding Periods are Still Catching On.  This was the first year that we asked about post-vesting holding periods: usage is relatively low, with only 18% of companies implementing them for stock grants/awards and only 13% for performance awards.
  10. ISOs, Your Days May be Numbered.  Of the respondents that grant stock options, only 18% grant ISOs. This works out to about 10% of the total survey respondents, down from 62% back in 2000.  In fact, to further demonstrate the amount by which option usage has declined, let me point out that the percentage of respondents granting stock options in 2016 (51%) is less than the percentage of respondents granting ISOs in 2000 (and 100% of respondents granted options in 2000—an achievement no other award has accomplished).

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