Retention Grants for C-Suiters

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The retention grant is an oft-reached-for tool in most corporate directors’ utility belts, and for good reason. As the name suggests, such awards are designed to induce the recipient to remain with his/her current company. To achieve this end, they are generally structured as special cash or equity grants above and beyond the executive’s standard long-term incentive package, often with longer vesting periods and strict forfeiture provisions if the person quits.

Directors are likely to find retention awards especially useful during times of transition or transformation, such as mergers or turnarounds, because they can help mitigate heightened executive flight risk and ensure a strong, stable executive team throughout this critical period. And indeed, roughly 40% of acquired companies implement some form of retention award, according to the 2014 Tower Watson’s “Global M&A Retention Survey.”

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