Firms Move to Regional Customization of Global LTI Plans

July 24, 2007 ( - Many U.S. multinational companies are significantly decreasing the size of their equity awards to executives outside the U.S. in a shift from traditional policies granting the same award levels to U.S. and non-U.S. executives, according to new Towers Perrin research.

The 2007 Global Long-Term Incentives Policies Survey found only 24% of companies expect in the near future to grant the same number of shares to both U.S. and non-U.S. employees at the same level in the organization. Companies are differentiating long-term incentive (LTI) award sizes by geography and tying awards closer to local-country practices, according to a press release on the survey findings.

Forty-two percent of survey respondents now differentiate awards by geography, up from 39% in 2005 and only 5% in 2001, the release said. A further 11% provide awards with a value that represents a consistent percentage of salary globally and, given that salaries vary by geography and are often lower outside the U.S., the same would be true of award sizes.

Among those companies that customize awards geographically, only a minority (13%) have separate award-size guidelines for each country. As for the rest, according to the news release:

  • 35% establish separate guidelines by region.
  • 22% create separate guidelines by tier.
  • 26% create separate guidelines by both region and tier.

Often, award sizes to non-U.S. employees are set as a percentage of the U.S. award size. Median policy award sizes Towers Perrin found are:

  • Europe – 80% of the U.S. award size (versus 71% in 2005),
  • Asia – 60% of the U.S. award size, and
  • Remainder of the world – 60% of the U.S. award size (versus 55% in 2005).

Additionally, the survey also found companies are looking to decrease stock option and restricted stock awards and instead focus on other types of performance-related plans, such as performance shares. More than a quarter of survey respondents have reduced LTI participation levels and more than a third plan to either reduce or further reduce future participation levels.

The survey included responses from 61 U.S. multinationals, including more than a quarter of Fortune 100 companies, across a variety of industries with median revenues of $21 billion.

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