The purpose of this Post is remind publicly-traded companies to revisit their stock ownership policies to determine whether a temporary waiver of the policy requirements is advisable. This Post is Part 5 of a 7-Part series addressing compensation adjustments that Compensation Committees could consider in order to continue to incent and retain their executive officers in today’s economy.
Stock Ownership Policies Typically Denominated in Dollars
Equity ownership goals within stock ownership policies are typically denominated in shares or dollars (the latter being a fixed dollar amount or a percentage of compensation). Dollar-denominated guidelines are the most common among publicly traded companies, and many of these guidelines are based upon a percentage of base salary. For those companies where compliance with their stock ownership guidelines is denominated in dollars, any significant drop in stock price is likely to cause the executive to fail the policy’s requirements.
Consider a Temporary Waiver of the Policy Requirements
Compensation Committees could consider a temporary waiver of the stock ownership requirements, with the idea that the issue will be revisited in the Fall of 2020. But in exchange for such waiver, the executive should be required to hold (i.e., not be able to sell) all shares currently subject to the policy. Such hold requirement should continue until the issue is revisited in the Fall of 2020.
Related Posts
Blog posts that are part of this 7-part series include:
- “Considerations with Respect to Upcoming Equity Grants” (Part 1 of 7)
- “Consider Changes to Increase Cash Flow” (Part 2 of 7)
- “Address Outstanding Performance-Based Equity Awards” (Part 3 of 7)
- "Retention Packages to Discourage Poaching" (Part 4 of 7)
- “Modifying or Terminating a 10b5-1 Trading Plan” (Part 6 of 7)
- “Does It Make Sense to Consider a Secular Trust for Deferred Compensation” (Part 7 of 7)
PartnerTony’s multi-disciplinary legal practice focuses on executive compensation, ESOPs and employee benefit arrangements (including their related tax, accounting, securities and corporate governance issues) in the United ...
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