Every month, Compliance Week publishes a list of the largest stock option grants and restricted stock awards during the previous period. The data and analysis are provided by compensation research firm Equilar.

THE DATA

Latest Data

View The Top Equity Awards Made In April 2005

Archived Data

View The Equity Awards From Each Month In 2004

Source

Data provided by Equilar, an independent provider of executive and board compensation analysis.

Mozilo

The largest option grant in April went to Angelo Mozilo, the chairman and CEO of $13.8 billion mortgage lender Countrywide Financial. On April 1, Mozilo was granted 1.4 million options worth more than $45 million, based on the grant date stock price of $32.60. The grant came three weeks before Countrywide announced that first quarter revenue had risen 22 percent to $2.4 billion, and profit had climbed 27 percent, from a year earlier.

Mozilo's grants were made on the same day that the company scheduled its earnings call. Also on that day, two other Countrywide executives were granted options large enough to merit inclusion in our "top 10" list for April. President and COO Stanford Kurland was granted options valued at $31.9 million, and David Sambol, the firm's executive managing director of mortgage banking and capital markets, was granted options valued at $21.4 million.

Typically, corporate executives that show up in our "top 10" list were also present in the prior year's list as well, as stock option grants for management typically take place once a year, and at the same board meeting every year.

That was certainly the case with the Countrywide executives. In April of 2004, for example, Mozilo was granted options valued at more than $44.6 million, based on a grant date stock price of $95.58 (Countrywide had effected a 3-for-2 stock as a stock dividend payable on April 12, 2004). Kurland and Sambol were also in the April 2004 "top 10" list, with grants valued at $45.4 million and $33.9 million, respectively.

Thompson

Also present on April's "top 10" list for 2004 and 2005 was Wachovia Corp. Chairman, President and CEO Ken Thompson. Last year, Thompson was granted 419,048 options valued at more than $18.7 million, based on the grant date stock price of $44.65. One year later, with the stock price at the country's fourth largest bank up to $50.38, Thompson was granted 418,864 options valued at more than $21 million. Wachovia Vice Chairman Wallace Malone Jr., was granted options on the same day, April 18, valued at nearly $30 million.

Stock Awards

Thompson at Wachovia also made the April "top 10" list for stock awards. On the same date as his option grants, Thompson was awarded 113,110 shares valued at $5.7 million. Like a few of April's top stock awards, Thompson's shares vest "assuming that certain financial performance targets are met."

Archibald

Similarly, Black & Decker Chairman, President and CEO Nolan Archibald was awarded 50,000 shares valued at more than $4.2 million, based on the award date stock price of $83.16. Archibald's shares are also "subject to certain vesting requirements." And over half of the shares awarded to Noble Corp. Chairman and CEO James Day were also granted as "performance vested restricted stock."

According to the Form 4 analysis conducted Equilar, the delivery of performance-based stock extended far beyond our "top 10" list. On April 20, for example, Bed Bath & Beyond granted performance-based restricted stock to four executives and to each of the company's co-chairmen. According to the filings, the vesting of the shares is subject to two criteria: time vesting, and "the Company's achievement of a performance-based test for the fiscal year of grant."

$164.4 million Intermagnetics General Corp., which makes magnetic resonance imaging products (widely known as "MRI" systems), granted restricted stock units to two of its sector presidents on April 13. The unit grants have fairly detailed performance-based vesting criteria:

“Vesting tied to compound growth in pre-tax earnings over the performance period, which ends on May 27, 2007; 3,500 shares vest at 8% compound growth; 7,860 shares vest at 11% compound growth; 10,000 shares vest at 15% compound growth (with scaling for performance between the defined thresholds). Below 8% compound growth, no shares will vest and the grant will terminate.”

The second largest stock award in April went to Outback Steakhouse CEO Bill Allen, who was awarded 300,000 shares valued at more than $12 million, based on the April 27 award date stock price of $41.62. The award was tied to a tiered vesting schedule based primarily on market capitalization:

“The reporting person received 300,000 shares of restricted stock that vest as follows: (i) 90,000 shares of restricted stock shall vest on 12/31/2009; provided however if on 12/31/2009 the market capitalization of the Company exceeds $6,060,000,000, an additional 30,000 shares of restricted stock shall vest; (ii) 90,000 shares of restricted stock shall vest on 12/31/2011; provided however if on 12/31/2011 the market capitalization of the Company exceeds $8,060,000,000, an additional 30,000 shares of restricted stock shall vest; and (iii) all remaining shares of restricted stock granted herein shall vest on 12/31/2014.”

Other Trends

According to Equilar, the April equity awards continued a number of trends that Compliance Week has been tracking for the past few years, including:

Performance-Based Options

Performance-based criteria were not limited to stock awards, as several executives were granted performance-based stock options.

On April 25, for example, Schering Plough granted options to nine executives that are "exercisable in one-third increments on April 26 of each 2006, 2007 and 2008, subject to Schering-Plough's satisfaction of certain performance criteria for the year 2005.”

Storage Technology Corp granted options to its chief marketing officer on April 26 that included a performance-accelerated vesting schedule. According to the executive's Form 4 filing, “1,875 shares vest on each of the first four anniversaries of the date of grant. The remaining 27,340 shares vest four years from the date of grant, except that the vesting of 6,835 shares may be accelerated on each of the first, second and third anniversaries of the date of grant if StorageTek meets predetermined performance criteria, set by the Human Resources and Compensation Committee of the Board of Directors.”

Premium-Priced Options

Several companies also awarded premium-priced options to executives. Typically, these options are awarded at an exercise price that exceeds the stock price on grant date; the options are ostensibly "underwater," thereby creating an incentive for the executives to increase the value of the company's stock price.

Federal Signal Corp., for example, granted options on April 27 to its president and CEO at an exercise price of $16.01, which was 12 percent higher than the stock price on the date of grant of $14.26.

Polaris Industries granted stock options to its president and COO on April 11 with a 15 percent premium over the stock price on the date of grant of $65.40.

And on April 11, Computer Associates granted options to 10 executives at a stock price of $32.80, which was 20 percent higher than the stock price on the date of grant of $27.23.

Shorter Term Lengths

Companies continue to shorten the term lengths of option grants, which can help reduce the income statement hit that option expensing is likely to create for some companies.

Pacific Sunwear, for example, granted options with 10-year term lengths in fiscal 2004, but on April 1 granted seven-year term options to its CEO.

The same was the case at Intel. The $34.2 billion semiconductor powerhouse granted options to 13 executives on April 21 that had option term length of seven years; in FYE 2004, the company had issued options with 10-year term lengths.

A downloadable spreadsheet of the top 10 option grants and stock awards from April 2005 is available from the box above, right.