Reviewing the recently released Fredrick W. Cook Co. report "The 2008 top 250
- Long-Term Incentive Grant Practices for Executives" re-reminded me
about how fast trends are moving in the executive compensation arena.

Less than a decade ago, executives were being showered with
plain-vanilla stock options on a regular basis, and many executives had
never even heard of terms such as restricted stock, "full-value"
awards, or performance shares.  Today, those plain-vanilla options are
on the decline, while restricted stock and performance shares are a
regular part of the long-term incentive lexicon, especially in public
companies.

The report, which focused on very large public corporations, shows a
dramatic shift in long-term incentive practices in recent years, first
away from stock options, then to restricted stock (or RS units - RSUs),
and today more towards performance shares (essentially
performance-restricted stock, instead of time-restricted stock). While
some readers may wonder if trends in large public corporations are
relevant to their organizations, at least in the executive compensation
arena, most of the trends and innovations tend to start in larger
corporations (who have the internal staff and external consultants to
research and develop new or revised approaches to long-term incentives).

While stock options remain the most common form of long-term
incentive (LTI) granted to executives, the percentage of execs
receiving them has dropped from 90% to 79% between 2005 and 2008.  Over
the same period, restricted stock, which gained ground earlier in the
decade, has actually dropped slightly in usage (from 66% to 60%),
largely at the expense of increased use of performance shares. 

Performance shares, which are earned (are granted and/or vested)
based on the achievement of predetermined goals over a specified period
of time, have gained significant traction over the past few years. In
2005, 40% of large-company executives received them, while in 2008 that
percentage had increased to 60%.

http://www.strategicpayseries.com/blog/trends-in-long-term-incentives