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Executive Long-Term Incentive Plans

Executive Long-Term Incentive Plans, an Equilar publication, analyzes trends in incentive plan design at Equilar 500 companies over the last five fiscal years. The publication examines the performance metrics and periods associated with long-term incentive awards granted to CEOs, CFOs and other NEOs. The publication also offers insight into how trends in design have fluctuated over the last five years, providing a preview of the state of LTIPs in 2022 and beyond. 

About the Report

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Key Findings

  • Relative TSR reigns supreme. The use of the metric grew in prevalence among Equilar 500 CEO LTIPs by nearly 13 percentage points from 52.8% in 2017 to 65.7% in 2021. 
  • Return on capital loses momentum. ROC was the only Equilar 500 NEO performance metric to decrease in prevalence in 2021, declining from 40.1% in 2020 to 39% in 2021.
  • Three is the magic number. Three-year performance periods are by far the most common time horizon set for Equilar 500 executive LTIPs, increasing from 86.7% in 2017 to 90.6% in 2021. 
  • CEO LTIPs call for higher performance ranges. Award payouts for Equilar 500 CEO LTIPs were most commonly triggered when performance hit 80%, and capped when performance hit 120% of target, with 84 of the 119 metrics falling within this range.
  • Max payouts are most commonly double the target.  A maximum payout range of 200% the target was the most prevalent across the Equilar 100, with 88 metrics including that parameter as the high mark for CEO LTIP performance awards in 2021.