To help companies benchmark proxy officer change-in-control (CIC) costs, Exequity analyzed 2010 proxy filings of 500 firms representing a wide cross section of industries and company sizes. Top five executives' CIC costs, with CEO values shown separately, are presented both as a percentage of year-end market cap, and in absolute dollar terms. This type of analysis enables firms to reach beyond a traditional comparison of CIC benefits based on an examination of each CIC program design feature, and understand how aggregate CIC costs for named executive officers compare to the market. Comparison of CIC costs to market cap largely neutralizes the impact of stock prices on the value of equity vesting acceleration, and therefore total CIC benefit values, thus leveling the playing field between companies with rising and falling stock prices. Relative costs and prevalence of 280G excise tax gross-up provisions were also collected and analyzed.

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In this Special Report, Ed Hauder of Exequity and Reid Pearson of The Altman Group examine the 38 equity plan proposals that failed out of approximately 2,200 total proposals put forward by Russell 3,000 companies from 2007 through 2009. The authors detail several lessons for companies to consider when requesting shares, the most significant of which are to ensure that both dilution and burn rate are not excessive.

The Special Report also looks at the success rates of RiskMetrics/ISS' against vote recommendations for equity plan proposals and finds that they vary, sometimes significantly, based on the industry group. Similarly, the percent of equity plan proposals that failed varies based on industry group. Companies that are considering requesting shareholders to approve additional shares for their equity compensation plans will have a better idea of the challenges they face after reading this Special Report.

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As an update to our Quick-Take Study, Long-Term Incentive Trends: 2010 Vs. 2009 CEO Long-Term Incentive Opportunity, released in March, Exequity included CEO LTI awards from 2008 to identify trends in LTI opportunity over the last three years. Overall, we found that 2010 CEO LTI award levels have essentially returned to 2008 levels. At the median, total LTI value decreased slightly (-2%) from 2008 to 2010 relative to an equal decrease (-2%) in grant price. This study presents additional key findings, including LTI opportunity percent change by industry from 2008 to 2010, an updated 2009 vs. 2010 CEO LTI analysis by stock price change which includes companies granting LTI awards in March and April, and an updated in-the-money option analysis for 2008 and 2009 stock option awards.

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After a general industry decline in long-term incentive (LTI) opportunity from 2008 to 2009, Exequity analyzed insider filings (Form 4) for the CEOs from Fortune 500 companies to gauge the percent change in LTI opportunity from 2009 to 2010. Overall, our study found that median LTI opportunity increased 8% relative to a 36% stock price increase over the prior year.

​This Study presents the key findings from the analysis, including percent change in LTI opportunity relative to three stock price categories (greater than 60% increase, less than 60% increase and greater than 20% increase, and less than 20% increase), percent change in LTI opportunity by industry, and an in-the-money option analysis for 2009 stock option awards.

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This Quick-Take Survey on 2009 Long-Term Incentive Grant Practices summarizes the responses Exequity received during a one week period, from January 27, 2009 through February 3, 2009. The Survey finds that 2009 LTI grant values are likely to decline more than 10% overall, with companies that actually change their grant values doing so by decreasing their grant values by more than 20% at median. That being said, a number of companies had not yet secured Compensation Committee/Board approval for their 2009 equity grants, and those companies were anticipating a decrease of more than 30% at median. So the continuing trend is likely to be downward.

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