October 26, 2009
by Erin White, Joann S. Lublin and Cari Tuna (an excerpt)

Companies as diverse as Polo Ralph Lauren Corp. and Sysco Corp. are adopting executive pay plans that echo principles laid out by government regulators, potentially signaling a broad shift in compensation practices. The changes at these non-financial firms aren't a direct response to moves by Treasury pay czar Kenneth Feinberg and the Federal Reserve, which apply to banks and big recipients of government bailout funds. The recession, more than government regulation, is driving some of the moves. But companies for a while have been seeking ways to reward executives' long-term performance and limit excessive risk-taking, according to compensation consultants. Among the changes: more stock-based compensation, with longer waiting periods before it can be sold; higher performance hurdles for bonuses; and limits on perks, severance and supplemental pensions.

Some companies, including Sysco, have already started making executives wait longer to sell stock from grants, the period known as vesting. The company this year eliminated a restricted-stock grant tied to an annual bonus, replacing it with a discretionary grant that vests over three years. Executives had to hold the prior grant for two years.

Irv Becker, national practice leader for executive compensation at Hay Group, said boards elsewhere are making executives wait to cash in: "Instead of vesting, let's say, in years two and three, maybe now it vests in year three and four."

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