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Better Carrots?

(continued)


Rethinking Options
Major findings from CFO's 2004 survey of long-term incentive compensation.

Use of Incentives

Use today

Will use if required to expense options

Note: Public companies only
Fixed-price stock options
87%
71
Restricted stock
66
75
Performance-vested stock options
35
47
Stock appreciation rights (SARs)
25
33
Phantom stock
13
19
Short-Term Thinking
Has the use of fixed-price stock options ever led to decisions at your company that were not in the long-term interest of shareholders?

Note: Includes only companies using stock options
Yes
23%
No
59
Unsure
18
Broad-Based Plans
Which employees receive stock options at your company?

2 years ago

Today

In 2 years

Note: Public companies only
Senior executives
88%
82
69
Junior executives
83
67
34
Nonmanagerial
38
27
10
Hurdles for Performance-Vesting Options
If you use options that can be exercised only if recipients meet performance targets, what metrics do you use?

Note: Includes only companies granting performance shares; respondents were allowed to choose more than one measure
Profits
24%
Revenue
14
Return on capital employed
12
Cash flow
9
Peer-group stock index
8
Return on equity
8
Economic value added
8
Other
6
Broad stock market index (e.g., S&P 500)
4
Market share
4




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