Large companies in nearly every industrialized nation have increased the use of long-term equity incentives as an integral part of compensation, according to a Towers Perrin survey of equity incentives in 22 countries.
U.S., Canadian and U.K. companies are moving away from a strong reliance on stock options for executive incentive compensation and are shifting to new long-term incentives, including added performance measures, according to the study.
In Belgium, Germany, Italy and Switzerland, "for the first time, long-term incentives are looked upon as common practice, as they are now in place at more than 80% of companies," a statement accompanying the survey noted.
Stock options are commonplace in Hong Kong and Singapore but less used in China, Japan and South Korea.
Non-option types of equity incentives have "gained prevalence over the past year or so worldwide, namely in the form of restricted stock and performance shares," according to the statement. "The introduction of mandatory expensing of stock options by the Financial Accounting Standards Board and the International Accounting Standards Board has driven companies to explore alternative incentive programs."
"We used to say, what you see in the U.S. today, you will see in Europe tomorrow and the rest of the world the next day," said James Matthews, Towers Perrin principal, said in the statement. "But performance-based equity plans have been prevalent for some time in the U.K., Netherlands and Australia, and so now U.S. companies may be in a position to learn from other countries' experiences."
