Novel Award Designs

The 2015 granting and proxy season was a year of major structural change in award designs. Companies introduced a surprising number of innovative programs. Some were developed to do a better job of aligning incentives, while others aimed for a superior say-on-pay vote outcome. Relative total shareholder return (TSR) awards continue to grow in prominence, while some new award features appeared for the first time (e.g., post-vest holding periods). Many companies are now exploring hybrid awards, which contain both a market condition and performance condition.

Here are the seven most intriguing award designs we encountered in 2015, along with some of the pitfalls and risks associated with each. Maybe one or maybe none of these designs is right for your organization. But we do hope that, as you enter design season for the 2016 grant, some of these ideas spark your creative energies.

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