Furthermore, the SEC\’s new compensation disclosure regulations include the requirement for disclosure of corporate policies on stock retention and hedging in the new Compensation Discussion and Analysis (\”CD&A\”) section, ensuring continued public discussion of ownership guidelines and holding requirements for years to come.
Although different in structure, both ownership guidelines and holding requirements encourage executives to develop a sizable equity stake in the companies they lead. Ownership guidelines generally establish stock acquisition goals that executives must achieve within a specified period of time, typically over three to five years.
Holding requirements call upon executives to retain a certain percentage of shares acquired through the exercise or vesting of stock options, restricted stock, and other equity awards.
With disclosure of these policies on the rise, Equilar reviewed trends in the prevalence and design of executive ownership guidelines and holding requirements among Fortune 250 companies for fiscal years 2005 and 2006.
This report, covering numerous aspects of the design of share retention policies is an invaluable tool for compensation professionals seeking to adopt or amend ownership guidelines and holding requirements for companies of all sizes.