2016 Executive Stock Ownership GuidelinesZoom inDownload PDF
Public companies are beholden to align long-term interests of executive officers with those of their shareholders, and this balance often manifests in how executives are paid in relation to company performance. Many companies address this through use of equity packages, but because executives can still sell or hedge these shares, their incentives to make long-term decisions for the company are not always clear. To avoid this, many companies implement stock ownership guidelines, requiring executives to own a certain amount of equity in the company.
Ownership guidelines require executives to obtain a certain amount of shares within a set timeframe, and holding requirements mandate that they retain a certain amount of shares received through vesting of stock or exercising of options. Aside from incentivizing executives, implementing one or both of these policies is important for shareholder support and for proxy advisors when justifying of pay packages.
In this report, Equilar examined various trends and components of executive stock ownership over the 2012, 2013 and 2014 fiscal years for Fortune 100 companies, and found that a combination of ownership guidelines and holding requirements has increased considerably in that time frame. In addition, there has been a steady increase in the value of required stock ownership over the past three years. Overall, Fortune 100 companies are implementing more restrictive stock ownership requirements with a higher median target value of required equity.
Read the entire report by Seamus O’Toole and David Outlaw, originally published by Equilar.