While Wall Street firms and the nation's largest companies have been the prime targets of the current scrutiny of executive compensation practices, they're not the only ones making changes to pay practices amid the economic turmoil.

An Equilar analysis of CEO compensation at 1,064 public companies with annual revenues under $1 billion found notable shifts among those firms in some compensation practices, including bonus plan design.

The report, 2009 CEO Pay Strategies Report for Emerging Growth Companies (registration required), looked at companies where the chief executive was in place for at least two fiscal years and the company filed a proxy statement before May 1, 2009, for a fiscal year ending between June 2008 and January 2009.

Among other things, the rocky economy has more companies adopting shorter performance periods for their bonus plans. Many firms are moving to quarterly or semi-annual performance periods (not payout periods) that allow for the adjustment of performance targets as conditions change.

"With the continued uncertainty and volatility in the market and the economy, companies are having a hard time setting performance periods over a year or three years or anything longer," Equilar research manager Alexander Cwirko-Godycki noted during a June 25 Webcast on the report findings. "Moving to three-month and six-month performance periods allows companies to micro-manage the bonus plan and set more realistic goals."

Many larger companies are also adjusting some of the metrics they use for annual incentive plans to focus on stability and cost reduction, rather than growth. While performance metrics based on revenue growth, net income, and earnings-per-share targets have dominated annual incentive plans, companies are increasingly moving to metrics such as working capital and cash flow.

Companies are also increasingly considering the deferral of bonus payouts. Cwirko-Godycki noted that the methods for doing so vary widely. For instance, some companies are looking at requirements to hold a portion of a bonus payment in escrow for up to three to five years, or even retirement. Others are considering paying a portion of a bonus in equity with holding requirements—for instance, a 25 percent payment in cash with the remaining 75 percent in restricted stock that vests over three years, and a requirement to hold the stock for a certain period after it vests.

Another trend is an increased reliance on relative total shareholder return plans, especially for long-term incentives, which Cwirko-Godycki said is driven by a "sense in the marketplace that any sort of long-term performance plan is viewed as shareholder friendly." However, rather than setting a goal for shareholder return to be X percent over the next three to five years, he said most companies are benchmarking relative to their peers, for instance, setting a goal of being in the top five of its 20 peers in three years.

Another area where he said companies are struggling and where changes are expected is equity pay. While he said it's still "not clear if a trend is developing," Cwirko-Godycki said a number of companies have recently granted stock options, which offer a huge upside when prices are depressed. He expects an increase in the use of long-term performance shares seen among larger companies at the start of 2009 to trickle down to emerging -rowth companies.

"It's a pretty obvious choice in this environment," he said. "Shareholders like the word performance ... and when you have payouts in equity, it further reinforces the connection between executive and shareholder interests."

Burn rates are also expected to increase, but only to a point. With stock prices down, companies would have to grant more shares to grant equity values similar to the levels granted in the last few years. However, because of pressure to keep burn rates low, companies may grant equity to fewer rank-and-file employees.

Cwirko-Godycki also expects to see greater transparency on bonus formulas, metric selection, and board discretion on bonuses going forward.

"As say-on-pay becomes more likely, the emphasis on bonus plans and how they're designed and how payments are carried out is only going to grow ... so companies really need to pay attention to how they're talking about bonuses" in their Compensation Discussion and Analysis, he said.