Long-Term Incentive Holding Power - Retentive Value Guidelines
One of the analyses we monitor at my company is our executive holding power. By holding power, I am specifically referencing the sum of unvested value of an executive's long-term incentive (LTI) awards. Examples of LTI vehicles we could or have used include RSUs, PBUs, Options and Cash.
I'm curious if other companies have positions (formal or informal) with respect to guidelines that serve or manage holding power as a means to provide retentive value on the executives. And if so, do the guidelines vary by executive type levels?
For example:
- Executive Officers (i.e. CEO direct reports): 5x of annual base pay
- Vice-President: 3x of annual base pay
In the above example, "Executive Officers" and "Vice-Presidents" are my made up executive type levels and I am using their base pay as the metric to drive measurement of holding power. So if a VP has a base of $200,000, we would expect to maintain unvested LTI value equal to $600,000 for the VP.
My company is in the high-tech industry, and so I would be interested in hearing what others in the same industry do. But to open this up to all that might be interested, feel free to respond with the industry you work (but not the company name).
Regards,
Mark
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this is a very solid approach. how do you address it with the rest of the org?
I work in the financial services industry, and we have stock ownership guidlines as well as retention expectations. Ownership guidelines are tieried among the executives -- CEO, COO, Business Unit ("BU") Heads (revenue) and other BU Heads (staff). There is also one additional layer below the executive level that has ownership guidline requirements. Our guidelines are based on fully owned shares, with unvested stock units [only] credited at a certain percent. The ownership guideline requirement is exepcted to be achieved within 5 years of new entry to the requirement, or new entry to the next elevated tier.
Retention expectations are just that- expectations. There is no formal requirement associated with retention; however, participating individuals are expected to increase their year over year holdings.
I know you were looking for high-tech industry exmaples. Hope this helped as a comparison point.