Company stock ownership required for S&P 100 CEOs is climbing to a value of six times salary or higher. While the most common multiple for S&P 100 CEOs has remained six times salary since 2015, CEO multiples greater than that have gained traction and appear on pace to become the majority practice in the near future. Stock retention requirements have also seen significant growth since 2015. A significant majority of companies (70% in 2021) now utilize retention requirements in conjunction with their stock ownership guidelines, signaling an increased commitment to both total ownership value and long-term consistent holdings with less strict adherence to the time needed to comply with policies. One driver of these policies occurred in September 2019 when the Council of Institutional Investors (CII) suggested that ownership guidelines and retention policies should be included as part of an executive compensation program focused on building long-term (at least five years) shareholder value. Prior to this suggestion, in 2015, Institutional Shareholder Services (ISS) began to account formally for these policies when evaluating and scoring a company’s equity compensation plan.
Willis Towers Watson’s Global Executive Compensation Analysis Team reviewed stock ownership guidelines and retention policies in effect during 2015, 2019 and 2021 within the S&P 100. Key findings from this study include:
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Executive stock ownership guidelines at S&P 100 companies: 2015 – 2021 | 1.6 MB |
As companies seek ways to better align leadership with stakeholders, stock ownership guidelines and retention policies will serve to amplify the long-term focus of executive teams. LTI awards continue to make up the lion’s share of CEO pay programs (61% for S&P 1500 CEOs in 2020); consequently, CEO ownership targets are likely to keep ballooning above six times salary. Stock retention requirements are also expected to broaden as more companies gravitate toward guideline-dependent and stand-alone retention policies. Going forward, companies who have not addressed these issues recently may need to gauge how their policy designs match up against current trends and expectations from shareholders.