Executive compensation consultancy Pearl Meyer has published new data that show companies are going deeper into their organizations with equity grants, and that burn rates have increased dramatically.
Key Findings
- 28% indicated more employees are receiving equity than in the previous year
- 34% have increased the value of equity granted to top leadership
- 37% have raised the value of equity offered to new senior leadership hires and 30.5% have raised equity grant values for other lower-level new hires
- 45% have increased their equity burn rate this year; just 7.5% noted it will be lower than 2021
"This outcome is not surprising," said Aalap Shah, managing director at Pearl Meyer and a sponsor of the survey. "We have heard many compensation committees and management teams discuss the need to broaden equity eligibility in order to be competitive. This speaks to the current difficulty in both retaining high performers and recruiting new talent. However, there is also concern, and rightly so, about overall share usage and shareholder sentiment."
The survey shows that fewer than a third—just 29%—take the value of unvested equity holdings into account when making new equity grant decisions.
"A review of an executive's unvested equity value can be an important tool for the compensation committee to manage costs, particularly when there is so much external pressure," noted Shah. "Having that information at hand provides a more accurate context for making decisions and evaluating whether or not you actually have a retention risk."
