Ideally, “best practices” should be defined as the choices that will best serve the needs of a particular company and its shareholders - not just what’s most popular in the marketplace. But too much of executive compensation decision-making today is driven by pressure to conform to outside standards such as proxy advisory firm guidelines, particularly when it comes to the use of equity-based performance incentives.
This article makes the case for why companies should regularly review the purpose of continuing stock awards to executives who have already accumulated a significant level of vested equity wealth. It discusses key considerations such as dilution, share usage and an executive's need for a diversified portfolio, as well as practical approaches to dealing with an overreliance on equity.
