Steven Hall & Partners recently completed a study of CEO long-term incentives at 300 public companies, 100 in each of the Large Cap S&P 500, Mid Cap S&P 400 and Small Cap S&P 600.

1. The Current Landscape of CEO Long-Term Incentives
Among Large, Mid & Small Cap Companies

2. CEO Long-Term Incentives
• Steven Hall & Partners (SH&P) reviewed long-term incentive
compensation for 300 CEOs, 100 in each of the following indices
– Large Cap S&P 500
– Mid Cap S&P 400
– Small Cap S&P 600
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3. CEO Pay Mix
• Long term incentives account for the majority of CEO compensation
among all three groups
• Large cap companies pay the highest average percentage of CEO
total compensation in long term incentives at 68%
– Small cap companies pay the lowest at 51%
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13%
17%
26%
19%
21%
23%
68%
62%
51%
Large Cap
Mid Cap
Small Cap
Base Salary Annual Incentive Long Term Incentive

4. CEO Long-Term Incentive Mix
• Performance-based long-term incentive plans (LTIPs) account for
over half of long-term incentives awarded to large and mid cap
CEOs
• Stock options rank second among large cap companies
• Service-based restricted stock ranks second among mid and small
cap companies
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28%
20%
20%
19%
27%
35%
53%
53%
44%
Large Cap
Mid Cap
Small Cap
Options Restricted Stock LTIPs

5. CEO Long-Term Incentive
Prevalence
• Performance-based incentives nearly universal among large and
mid cap companies
• Stock options more prevalent at large cap companies
• Service-based restricted stock more prevalent at small cap
companies
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65%
55%
92%
50%
64%
91%
44%
74% 72%
Stock Options Service-Based Restricted Stock Performance-Based LTI
Large Cap Mid Cap Small Cap

6. CEO Long-Term Incentive
Prevalence
• Majority of companies in each index grant two LTI vehicles
• Large and mid cap companies least likely to award only one LTI
vehicle
• Small cap companies least likely to award three LTI vehicles
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17%
54%
29%
18%
59%
23%
29%
52%
19%
1 Vehicle 2 Vehicles 3 Vehicles
Large Cap Mid Cap Small Cap

7. CEO Long-Term Incentive
Prevalence
• Companies awarding two vehicles typically grant one time-based
and one performance-based LTIP award
• Performance-based LTIP is most common among companies
awarding only one vehicle
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2% 2%
13%
4%
30%
20%
29%
2%
16%
7%
18%
34%
23%
6%
11% 12% 11%
8%
33%
19%
Options R/S LTIP Options & R/S Options & LTIP R/S & LTIP Options, R/S & LTIP
Large Cap Mid Cap Small Cap
1 Vehicle 2 Vehicles 3 Vehicles

8. Performance-Based Awards
Performance Period
• Majority of payouts under CEO LTIPs based on a three year
performance period
• Notable minority of mid and small cap companies base payout on
only one year of performance
– Most require an additional two to four years of service-based
vesting after performance period ends
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2% 2%
90%
2% 3%18% 4%
76%
2%15%
8%
72%
1% 3%
1 Year 2 Years 3 Years 4 Years 5+ Years
Large Cap Mid Cap Small Cap

9. Performance-Based Awards
# of Performance Metrics
• Majority of companies use more than one performance metric to
determine LTIP payouts
– 64% of large cap companies
– 58% of mid cap companies
– 51% of small cap companies
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36%
29%
25%
10%
42%
47%
7%
4%
49%
33%
17%
1%
1 2 3 4+
Large Cap Mid Cap Small Cap

10. Performance-Based Awards
Performance Metric Prevalence
• Relative TSR is most prevalent metric among large cap companies
• Earnings metrics most prevalent among mid and small cap
companies
• Other less prevalent metrics observed include returns (ROA, ROE,
etc.), revenue and cash flow
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60%
43%
37%
21%
12% 9%
8% 5%
41%
51%
27%
20%
4%
10%
3%
8%
31%
54%
25%
22%
8%
13% 3%
7%
Relative TSR Earnings Returns Revenues Cash Flow Other Financial Other Non-
Financial
Absolute TSR
Large Cap Mid Cap Small Cap

11. Service-Based Vesting
Stock Options
• Majority of CEO stock options vest over three or four years
• Stock options typically have a step vesting schedule
– Vest in increments over the vesting period
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2% 2%
57%
38%
2%2%
46% 44%
8%
5%
41%
43%
11%
1 Year 2 Years 3 Years 4 Years 5+ Years
Large Cap Mid Cap Small Cap
89%
92%
95%
Large Cap
Mid Cap
Small Cap
Step Cliff

12. Service-Based Vesting
Restricted Stock
• Three years is the most common vesting period for service-based
restricted stock
• Step vesting most prevalent for restricted stock awards
– Cliff vesting used by a more sizeable minority for restricted stock
than for stock options
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4%
64%
31%
2%
67%
22%
11%3%
61%
30%
7%
2 Years 3 Years 4 Years 5+ Years
Large Cap Mid Cap Small Cap
64%
72%
80%
Large Cap
Mid Cap
Small Cap
Step Cliff

13. About Steven Hall & Partners
Steven Hall & Partners is an independent executive compensation consulting firm serving
as outside counsel to boards, compensation committees and management. The firm
focuses solely on executive compensation, director remuneration and related corporate
governance matters.
For more information
Web: www.shallpartners.com
Email: shp@shallpartners.com
Phone: 212.488.5400
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