Time-Vested Restricted Shares Gaining Popularity as Executive Compensation

May 16, 2007 (PLANSPONSOR.com) - A majority (63%) of U.S. companies are now offering their executives time-vested restricted shares, an incentive that was once most popular as a tool to retain middle managers, according to the Hay Group's 2006 study of executive compensation.

The study of more than 12,000 executives found that 95% of U.S. companies offer some sort of long-term incentive to their executives and 66% include more than one plan in the compensation package.

The study said that recent changes to the legal, accounting, and regulatory environment aimed at trying to keep a handle on executive pay along with shareholder pressure have forced U.S. companies to reconfigure the balance between long-term incentives and performance-based incentives.

According to the Hay study, stock options remain the most commonly used long-term incentive used in the U.S., despite predictions that the issuing of stock options would lose traction. Behind stock options, restricted stock plans are the most often used long-term incentives.

The scope or complexity of an executives’ job duty has more influence over their base pay than what industry they’re in, or their job title, the survey found.

The finance-oriented industries surveyed-insurance and diversified financial services organizations-have the highest incentives as a percentage of base salary, while the retail industry has the lowest, according to the study.