Below is an excerpt from ISS-Corporate’s recently released paper “Special Grants: Who Gets Them and How Much?” The full paper is available for download from the ISS-Corporate online library.
Special grants — equity awards made outside of regular annual compensation — can be an effective compensation vehicle but can also generate investor concern if they are perceived as excessive or unjustified. These grants may take the form of new hire or promotion awards, one-time retention awards or one-time incentives, and are often rationalized as helping to attract, retain and incentivize executives. However, investors sometimes take issue with off-cycle grants, and often the sheer size of them can trigger significant investor pushback. Tesla’s $55.8 billion grant to CEO Elon Musk in 2018 and the subsequent increase in Tesla’s valuation, as well as the Delaware Court of Chancery’s January 2024 decision to void Musk’s pay package, highlight both the potential value these grants can help create for shareholders as well as the concerns they may raise. ISS-Corporate analyzed non-cash special grants awarded to CEOs in the U.S. in fiscal year 2022 to shed light on how they are used in compensation packages and whether the controversy surrounding their use is merited.
By:
Jun Frank, Global Head of Compensation & Governance Advisory, ISS-Corporate
Sandra Herrera Lopez, Vice President, ESG Content & Data Analytics, ISS-Corporate
