Vesting

RiskMetrics Group doesn’t care whether vesting provisions are expressed for equity awards under a plan. RMG will note what vesting provisions exist in its narrative disclosure concerning a plan, but they do not drive the RMG vote recommendation.

However, other institutional shareholders would like to see minimum vesting provisions expressed in equity compensation plans.  The institutional shareholder whose policy generally ends up being implemented most often is Fidelity.  Generally, Fidelity wants to see minimum vesting provisions as follows:

  • One year minimum vesting for performance-based awards, and
  • Three year minimum vesting for time-based awards, which can be pro-rata.

Note that in the past, Fidelity has supported equity compensation plans that contain exceptions to accelerate vesting upon death, disability, retirement or change in control.