January 17, 2012 (PLANSPONSOR.com) - Companies continue to shift away from stock options and other “appreciation” awards toward a greater emphasis on full-value awards in their equity compensation plans.
Full-value awards now comprise 47% of the number of shares granted and 75% of the grant-date fair value of all equity awards at the typical company, compared to 29% of the shares granted and 57% of the value five years ago, according to Towers Watson’s annual study of equity incentive programs at Fortune 500 companies.
The median dollar value of equity award programs across Fortune 500 companies increased by 29% in 2010, bringing the median value just slightly below 2008 levels. Over the same period, the median Long-Term Incentive (LTI) fair value as a percentage of average market capitalization decreased by 5% at Fortune 500 companies as the market recovery outpaced the increase in award values.
Equity plan participants at Fortune 500 companies in aggregate exercised 90% more options and other appreciation awards in 2010 than in 2009. This increase was attributable to improved market conditions and contributed to a reduction in overhang from 10.0% to 9.7% at the median. Results of the study are here.