Further to our recent report: "Director Equity Award Practices: COVID-19 Alternatives," which addressed alternatives to typical director equity grant practices companies may wish to consider to avoid potential negative perceptions associated with awards based on COVID-19-depressed stock prices, Exequity's new "2020 Director Equity Grant Practices" reveals how large companies are reacting to these circumstances based on its analysis of the grant practices of 109 S&P 500 companies with annual meetings between April 1 and May 1. According to the firm's analysis, only 3% of companies disclosed a change to their director grant practices - all seemingly in the form of an average stock price in lieu of the award date price; another 91% made no detectable changes; and 6% haven't yet disclosed equity awards.
Exequity surmises that boards may be criticized either way (i.e., whether they change their practices or not); as such, sticking with the historical practice/policy may be the easiest path and will avoid hindsight second-guessing about the board's decision-making surrounding any change in practice. The firm suggests those exploring potentially changing their practices first consider the possible scenarios that may fuel future criticisms and consider whether the change would apply in future grant years. Of the companies reviewed, 90% grant equity to their directors annually. Of those, 57% do so within a week of their annual meeting; 27% during the first quarter; and 9% more than one week after the annual meeting.
Access additional resources on our Director Compensation page. This post first appeared in the weekly Society Alert!