The new big thing in exec pay: Restricted stock
Options are bowing out and restricted stock is zooming in for companies trying to retain executives and find new ones.
Due to a variety of factors, the image of loading up pay packages for top officials with options is a fading one.
Cost factors and tax implications have pushed companies into offering restricted stock, which allows employees a stake in the company but proves less onerous, particularly for start-ups short of cash.
"What we've seen, especially starting in the dotcom bubble, was stocks options as the soup du jour of employee incentivization," said Clint Costa, a tax attorney with Chicago law firm Duggan Bertsch. "What we've really seen over the past 10 years is that restricted stock, for various reasons, has become much more prevalent."
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As its name implies, restricted stock prevents employees from selling it within a certain time period.
Such arrangements come with the allure of future gains but also don't hamstring new companies looking to preserve their cash.
"If you're a very small company and you're basically bootstrapping or have a little bit of seed capital, it's more expensive to put a stock options plan in place," Costa said. "If you want to offer qualified options, then you've got to have someone to help you through the maze of the tax code."
The numbers tell the story of how many companies have been moving away from options.
As recently as 2007, the percentage of companies in the S&P 1500 that granted options only stood at 16.2 percent. By 2012, that number had fallen to 5 percent, according to executive compensation data firm Equilar. The total granting options (along with restricted stock) went from 78.5 percent to 65.2 percent.
Meanwhile, firms offering restricted stock only surged from 17.8 percent to 32.6 percent. The total granting restricted stock rose from 80.1 percent to 92.8 percent.
Costa said restricted stock is easier to understand than the complicated options world, making it a popular alternative.
"It's just starting to become something that people blog about, and experts say there are so many positives to it," he said. "I think it will continue to grow on its own merits and momentum."
—By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.