DATE PUBLISHED: NOVEMBER 6, 2024
Equity awards are the primary compensation vehicle for U.S. executives, comprising 71 percent of total CEO compensation for S&P 500 CEOs and 60 percent for Russell 3000 (excluding S&P 500). As compensation committees seek to maintain alignment of executive and shareholder interest, the use of risk mitigators in equity grants has increased over the past five years. This paper analyzes key equity compensation risk mitigating practices such as clawback policies, stock ownership guidelines, holding period requirements, and anti-hedging and pledging policies, which enhance accountability over pay and ensure that executives bear similar risks as shareholders.
