The number of S&P 500 companies which maintain both ownership guidelines and retention requirements has increased from 33% in 2010 to 63% in 2019, according to research published by Willis Towers Watson. Correspondingly, the number of companies utilizing ownership guidelines exclusively has declined from 50% to 33% over the same period.
Several entities have increasingly pushed companies to use retention requirements to prevent executives from quickly cashing out long-term incentives. In 2015, ISS began to account for the policies within its Equity Plan Scorecard methodology. More recently, the Council of Institutional Investors (CII) suggested that such policies should be included in the executive compensation program. CII recommended companies utilize a retention requirement of at least five years.
- 54% require CEOs to hold 6x of their salary, up from 10% who required that level in 2010
- 24% require 5x, down from 63% in 2010
- 17% require more than 6x, up from 10% in 2010
- 52% require CEOs to retain equity until stock ownership guidelines are met.
- 6% require CEOs to meet ownership guidelines and a stand-alone retention policy to hold shares for a certain period after vesting.
- 6% have only a stand-alone retention policy.