A new research report, Executive Decisions, Making the Most of Compensation Plans To Build and Protect Personal Wealth, from AllianceBernstein addresses equity compensation from the executive’s perspective.
One of the more interesting things detailed in the report is the finding that the optimal exercise time for stock options is when their time value is in the range of 10%-30% of total value. This could result in option exercises that occur well before the end of the option term. Many advisors had previously advised that executives should hold onto options until they are just about to expire in order to maximize the potential return from the stock options.
Additionally, the report compiles AllianceBernstein’s key findings, which include:
- How to evaluate and compare different types of stock-based compensation
- How to integrate stock-based compensation into lifetime wealth planning, using a “core and excess capital” framework
- A method for determining how much single-stock risk is appropriate in your portfolio, and, if you need to diversify, a framework for choosing which holdings to divest and which to keep
- Strategies for integrating single stock with estate and charitable planning
- Determining when and how to use non-qualified deferred compensation plans
- Best uses of 10b5-1 plans
- How to make well-informed decisions regarding Net Unrealized Appreciation (NUA) elections and 83-b elections
The report can be downloaded from: