All in Restricted Stock

The world of compensation is filled with odd inconsistencies. Are you motivating someone to retain them, or are you retaining people, so you can motivate them? Are you looking to hire “world-class talent”, or do you want to pay more like your peers? Perhaps the most frustrating is the dilemma of compensation data being absolutely accurate and almost completely wrong.

Stock Options, Restricted Stock Units, young Performance Units and their cousin Non-Qualified Deferred compensation tragically died in 2017 as an unintended consequence of colliding with the 429 page U.S. tax reform called the ‘‘Tax Cuts and Jobs Act.’’ It should be noted that Employee Stock Purchase Plan is currently in critical condition at a local hospital.

Not so long ago nearly all of the “big” executive compensation consulting firms were touting Relative Total Shareholder Return (R-TSR) as the solution to executive pay misalignment. Just add this one ingredient to LTIP and your officers and shareholders will be happy! In the past six months, many of those same firms have explained how it is crazy to depend on ONLY Relative TSR. They are now focusing the majority of performance weighting on financial and operational metrics.

ESPP are an ugly duckling in the world of compensation, or benefits, or payroll, or HR, or stock administration. The fact that they do not elegantly and easily fall into any single area is proof of their misshapen, clumsy bodies and inability to look and act like any other pay or benefits tool. But, when ESPPs are nurtured they can grow into something beautiful. And, when people are properly educated about them, the odd features and awkward start can still result in something special.