US Update: Equity Compensation in 2009-10 Dublin Chapter Meeting Wednesday, 23 September 2009 Michael Bendorf Executive Director, Global Equity Organization.

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Presentation transcript:

US Update: Equity Compensation in 2009-10 Dublin Chapter Meeting Wednesday, 23 September 2009 Michael Bendorf Executive Director, Global Equity Organization

Introduction After an extreme period of turbulence, search for new best practices in equity compensation is ongoing Ongoing discussion about how best to use compensation to support acceptable risk & reward Increasing appetite for regulatory solutions Enhanced disclosure or “reasonable” program guidelines? Governments searching for new sources of revenue Greater fluidity in service provider alliances as issuers looking for greater value at lower cost

Corrective measures have become popular Clawbacks 64% of Fortune 100 companies have policies in place to recoup ‘improper’ or ‘excessive’ compensation1 Up from just 17% in 2006 Option Resetting At one point earlier this year, as many as 90% of stock options held by employees at Fortune 500 firms were underwater More than 100 tech/biotech firms have conducted option exchange programs in the past two years2 53% Options for options 30% Options for restricted stock 12% Options for combination of options & restricted stock 1 Equilar 2009 Executive Compensation Outlook 2 Radford 2009 Mid-year Update

Prescriptive measures are also under consideration Greater understanding of how equity vehicles can impact appetite for risk Continued increase in use of restricted stock/RSUs at all but the smallest technology firms 68% of technology firms now emphasize full value awards Equity Mix Emphasis (2008-2009) Source: Radford 2009 Mid-year Update

Prescriptive measures are also under consideration Performance-based equity continuing to make inroads Use of performance attachments increasing, but limited 71% of large technology firms use, but only on 5% of award pool1 Ongoing discussion regarding timeframes and measures Equity compensation programs are becoming more complex, in part a recognition of multiple roles Prevalence of Equity Compensation Design for S&P 5002 2007 2008 1 Radford 2009 Mid-year Update 2 Equilar CEO Pay Strategies Report for S&P 500

Forecast for 2010 Enhanced regulatory efforts will mark executive compensation in the coming year New ‘Compensation Czar’ empowered to set or influence compensation levels at TARP recipients Impact likely to extend beyond just Financial Services sector Legislation pending in Congress to give shareholders non-binding ‘say-on-pay’ SEC proposing new rules to increase independence of Compensation Committees Potential impact of G20 discussions in Pittsburgh this coming week unknown

Questions and Discussion For more information Equilar David Sasaki +1 650-286-4570 dsasaki@equilar.com www.equilar.com Radford Surveys + Consulting Brett Harsen +1 408-321-2547 bharsen@radford.com www.radford.com