Compensation; Executives get smaller equity share: survey.

• Author: Marshall, Jeffrey
• Position: BusinessBRIEFS

The stock bandwagon appears to be slowing. For the first time in nearly 15 years, America's largest companies reported allocating a smaller share of corporate equity for executive and employee stock incentives, according to a survey of 2004 proxy reports by compensation consultants Pearl Meyer & Partners. In a related development, the rate of grants to employees dipped for a third straight year, approaching stock utilization levels last seen six years ago.

"The upcoming proxy season is likely to show a continued trend of reduced dilution, as companies respond to the anticipated costs of mandatory option expensing and investor concerns over equity practices," said Steven E. Hall, president of Pearl Meyer & Partners.

Total allocations fell to 16.36 percent of common shares outstanding, from a peak of 17.32 percent a year earlier, according to Pearl Meyer's annual survey of equity use among the nation's Top 200 industrial and service companies. The decline was due in large part to more use of full-value stock grants, which generally require the use of fewer shares than options to deliver the same or greater value.

Also fueling changes in equity practices is a move toward creation of a more direct and visible link between executive pay and performance. "Equity grants increasingly include performance hurdles designed to reflect companies' underlying...