Stock compensation in incentive compensation management are 1/2 motivational and 1/2 prevention. - 14 June 2009

Stock compensation in incentive compensation management are 1/2 motivational and 1/2 prevention.

The two key shareholder stats in incentive compensation management

The key statistic to look at, with stock options in incentive
compensation management, is unvested stock value or how much an
individual will leave on the table if they decide to go to another
company tomorrow. We want that amount as high as possible. Higher for
better performers.

Pay attention during the times of the annual burn rate or the
number of shares you grant during the year’s percent of outstanding
stock and dilution which is the number of shares already granted or
could be granted as a percent of outstanding shares.

I can tell you that your shareholders are paying attention to those
two numbers because the more stock you grant to employees, the smaller
the pie will be for shareholders. And with falling stock prices, you
have to be sure the shareholders view your grants or employee grants as
fair.

Options and restricted stock in incentive compensation management

Restricted stock in my opinion is a good vehicle to use these days
because it pumps up the unvested stock values immediately. And the way
restricted stock works is an outright grant, meaning that you get the
full value of those shares when the vesting criteria is met.

Stock options are great with incentive compensation management, not
only do you have to meet the vesting criteria but you also have to have
the stock price go above the strike price or the grant price that you
received. If it doesn’t, you’re not going to make any money or the
employees are not going to make any money. So restricted stock has seen
a huge comeback here. In fact literally, almost 50% of companies out
there are using restricted stock for some grants.

The nice thing also about restricted shares is

For more information on Stock in Incentive Compensation Management.

Posted by Dan Walter

Performensation: Equity Compensation for High Performance Companies.