Effective executive share ownership guidelines help foster an ownership mentality among executives, aligning them with the company’s long-term shareholders. These guidelines also serve to minimize excessive risk taking that might be focused on short-term returns at the expense of long-term value creation and they are universally viewed as a good governance practice by shareholder and corporate governance groups.
Steven Hall & Partners recently reviewed Chief Executive Officer (CEO) share ownership guidelines among the 200 largest companies in the United States based on revenues (“Top 200”).
Among the Top 200, share ownership guidelines are a majority practice for the largest companies in the United States with 195 CEOs required to own either a certain level of company stock or retain a certain portion of the equity awards granted to them. Only five CEOs in the Top 200 (2.5%) are not subject to ownership guidelines and all five are special situations, as detailed below.
Among the CEOs in the Top 200:
193 are subject to a share ownership guideline
16 are subject to a share retention guideline
5 are not subject to any ownership or retention guideline