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Nice analogy, Dan. Imitating another is playing for a tie. Winners act first and define what is best. Leaders don't wait for others to guide them.

Dan ---- some positive news about changes in executive compensation. Two questions:

1) Do you know of actual companies that have these new plans in place? Can you share the names?
2) What is the size of companies using these plans? Any particular industry?



I do know of actual companies doing this. Most have very little motivation to share their secret's to success. Most tend to be either very large or very small.

There are a few "poster children" for different approaches to equity compensation. Netflix is one. Google is another. Both were incredibly innovative when they created their programs. Both programs seem more normal now as others have done similar things.

I'm very dubious about anything that requires more than 3 sentences of 8th grade level reading comprehension to explain.

Dan --- could you give an example of a plan design. It's difficult for me to understand without examples. Thxs


Great question. I can give you tons of examples, but they only make sense in context to each company's specific philosophy, goals and approach to equity compensation.

The major areas are:
Vesting: When and why does something vest? 4 years is the base line, but anything from 1 year to 10 years may be in play. Pure time was the gold standard for years, but a mix a time and performance is not becoming normal for executives and more progressive companies are pushing this concept deeper into their organizations.

Type of Equity: Stock options were the only tool used by a majority of companies not so long ago. Now option use has been declining as some companies have moved solely to RSUs (often not a great idea) and others have started using a blend of tools. The blend is where the differentiation occurs and it is hard to corral and "common" tendencies.

Performance conditions: When companies moved to performance-based equity just 4-5 years ago almost everyone focused solely on TSR (Total Shareholder Return) as the performance metric. Many companies have seen a misalignment between pay and actual performance due to this metric and companies are now looking to create metrics that are more representative of shareholder expectations and company strategy. BUT>>> The SECs new pay for performance rules focus their eye on TSR, so we may see companies continue using the metric alone even as that practice is being proven to be critically flawed.

I can go on, but the variations are almost endless. Vesting 50% at 2 years and 50% at 4. Immediate vesting. Expiration in 4 years or 7 year, instead of 10. the list goes on.

Thanks Dan.

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