Equity grants to senior executives of companies going public are rebounding to levels not seen since the 1990s, according to Hewitt Associates, which cited the trend as a sign of economic recovery.

In 2003, equity grants to the top executives of the companies with IPOs amounted to 3.5 percent of total common shares on average, Hewitt, a human resources consulting firm found. That compares with 4.2 percent for CEOs of companies that went public in 1999, a figure which dropped to just 0.3 percent by 2001.

The resurgence is also occurring for senior executives of organizations spun off from other companies. For example, the top five leaders of these organizations owned about 0.7 percent of the post-IPO shares in 1999. This percentage dropped to 0.5 percent from 2000 to 2002. But by 2003, the percentage rose to an average of 1.1 percent, according to Hewitt.

“Equity grants were unfairly dragged down with the poor economy and corporate scandals of the past few years,” said Ryan Harvey, a senior Hewitt consultant. “During that time, companies stopped using equity grants in an effort to determine a better solution. However, many now realize that equity grants represent the strongest tie to shareholders’ interest.”

When a CEO and top management have a certain percentage of ownership post-IPO, it shows analysts and investors that management has confidence in the success of the IPO as well as in the company, Hewitt claims.

The consulting firm also cited a correlation between pre-IPO ownership value and size of stock-based grants made at the time of the IPO. The higher a CEO’s pre-IPO ownership value, the lower the IPO grant (and vice versa).

For example, CEOs who owned pre-IPO equity of at least eight times their salary prior to the IPO received an average IPO equity grant valued at 75 percent of a typical annual grant. Conversely, CEOs who owned less than eight times their salary in equity prior to an IPO received an average grant that was more than 200 percent of a typical annual grant, Hewitt noted.