Fortune 500s Alter Incentive Programs

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    Companies continue to shift away from stock options and other ‘appreciation’ awards toward a greater emphasis on full-value awards in their equity compensation plans, says Towers Watson. Full-value awards now comprise 47 per cent of the number of shares granted and 75 per cent of the grant-date fair value of all equity awards at the typical company, compared to 29 per cent of the shares granted and 57 per cent of the value five years ago. The annual study of equity incentive programs at Fortune 500 companies found the median dollar value of equity award programs increased by 29 per cent in 2010, bringing the median value just slightly below 2008 levels. Over the same period, the median Long-Term Incentive (LTI) fair value as a percentage of average market capitalization decreased by five per cent as the market recovery outpaced the increase in award values. Equity plan participants in aggregate exercised 90 per cent more options and other appreciation awards in 2010 than in 2009. This increase was attributable to improved market conditions and contributed to a reduction in overhang from 10 per cent to 9.7 per cent at the median.