Page 440 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

426 The Complete Guide to Executive Compensation

The next step is to determine the number of shares, or stock option targets, to be granted
using these assigned multiples. Based on a current market price of $105, the number of shares
for the CEO (grade 35) would be 44,851 shares (i.e., 1,095,200 4.3 $105). Following
the same methodology for all 25 grades (and rounding to the nearest 100) results in the
numbers shown in column 3 in Table 8-15. It could remain a one-column chart, perhaps
adding a zero or no-option column for those not performing satisfactorily and/or about to
leave the company.

Number of Shares by Rating
Grade 0 1 2 3 4 5 6
35 0 18,000 36,000 45,000 54,000 72,000 90,000
34 0 15,000 30,000 37,500 45,000 60,000 75,000
33 0 12,500 25,000 31,250 37,500 50,000 62,500
32 0 10,500 21,000 26,250 31,500 42,000 52,000
31 0 8,700 17,400 21,750 26,100 34,800 43,500
30 0 7,200 14,400 18,000 21,600 28,800 36,000
29 0 6,000 12,000 15,000 18,000 24,000 30,000
28 0 5,000 10,000 12,500 15,000 20,000 25,000
27 0 4,400 8,800 11,000 13,200 18,600 22,000
26 0 3,800 7,600 9,500 11,400 15,200 19,000
25 0 3,300 6,600 8,250 9,900 13,200 16,500
24 0 2,900 5,800 7,250 8,700 11,600 14,500
23 0 2,500 5,000 6,250 7,500 10,000 12,500
22 0 2,200 4,400 5,500 6,600 8,800 11,000
21 0 1,900 3,800 4,650 5,700 7,600 6,500
20 0 1,500 3,200 3,950 4,800 6,400 8,000
19 0 1,300 2,600 3,250 3,900 5,200 6,500
18 0 1,000 2,000 2,500 3,000 4,000 5,000
17 0 900 1,800 2,250 2,700 3,600 4,500
16 0 700 1,400 1,750 2,100 2,800 3,500
15 0 500 1,000 1,250 1,500 2,000 2,500
14 0 400 800 1,000 1,200 1,600 2,000
13 0 300 600 750 900 1,200 1,500
12 0 200 400 500 600 800 1,000
11 0 100 200 250 300 400 500
Table 8-15. Stock option targets by rating

The next possible enhancement would be to build a range around the targeted rating
(i.e., column 3 number). This could be accomplished by adding columns 2 and 4. A further
refinement would be to add column 6, now resulting in a schedule of columns 0, 2, 3, 4,
and 6. For more reference points, and columns 1 and 5, resulting in the full table shown in
Table 8-15. A further step would be permitting the grantor to select a number between,