How have stock-market volatility and the economic downturn of the past few years changed corporate stock grant practices?
Changes in executive compensation and equity pay practices stemming from the downturn of 2008 and 2009 were predicted to be far more extensive and vigorous than those caused by the 2000–2002 market drop. More companies were affected in 2008–2009, the drop in the markets was accompanied by a steep rise in unemployment, and stricter rules on disclosure and shareholder approval were already in place. In general, during the recovery since 2008 the focus in stock compensation has shifted from adjusting grant practices for mandatory expensing to questioning how stock grants, particularly performance-based grants, should be used. In some cases, the downturn has provided new lessons for employees with equity compensation. Quoted in The Wall Street Journal (Firms Rethink Compensation Plans, Feb. 17, 2009), one CEO said: “We built a performance-based system and there was a lot of risk in there, which I don’t think we’d fully recognized because we’d never seen markets like this. To the management
