What We’re Thinking About September 2026

Two topics stood out in our most recent internal discussion: recent data around the prevalence of underwater options, and how SaaS retention spend is reshaping the cost of talent after the “SaaS-pocalypse.” We continue exploring these topics and welcome dialogue about them and others we’re tracking.

1. Are CEO Stock Options Struggling to Stay Above Water?

A recent study found that roughly a third of stock options granted since 2003 are now underwater — rising to 37% for 2024-2025 grants, up from 25% in 2023, and concentrated in retail and healthcare. As many other executives receive options alongside the CEO, this has considerable downstream implications. 

Furthermore, we have noted a broader move away from options in pay packages: only about 45% of S&P 500 companies have granted any since 2023, compared to 82% for RSUs and 91% for PSUs. That said, this decline is far from uniform, and the extreme upside potential of stock options is still an appealing vehicle in compensation packages. Several large companies increased their options weighting this year, and our own data shows no correlation between lower options usage and elevated TSR. Boards using options effectively aim to balance Black-Scholes cost with employee psychology and shorter expected tenures, deploy options at the right talent levels, and understand sector-specific retention risks if options don’t pay out.

Questions for the board:

1. Where in the organization are options best aligned with the compensation philosophy?
2. Even if options are underwater now, what is the upside potential under various rebound scenarios, and how do we best communicate that to recipients?
3. If your options are meaningfully underwater, is an exchange program worth exploring, or does the signal it sends outweigh the benefit? Related resource: What to do about deep underwater stock options.
4. If you were to move away from options, what vehicle would better capture performance without abandoning program rigor?

2. How are Companies Addressing Retention Concerns Brought on by the “SaaS-pocalypse?”

What has enterprise software recovery looked like after a year of eye-popping headlines, and how has it affected talent and spend dynamics? We’ve seen retention spend climb, pushing stock-based compensation expense up even as companies try to maintain SBCE discipline. Boomerang hires are becoming more common, easing overall retention pressure. And as agentic workflows enter the workforce, boards are increasingly asking when efficiency gains from heavy AI investment may begin to appear, or if they need to re-evaluate their talent strategies in response.

Questions for the board:

1. If AI-driven efficiency hasn’t shown up in headcount yet, what would convince you it’s real rather than aspirational?
2. Is your retention spend targeted at genuinely scarce talent, or has it become a blanket response to volatility?
3. Are there levers other than pay that can help drive retention?