Originally Posted by HonestChieffan
The longer required time the better for an option, yes. But I may be wrong but I believe IRS rules define the terms of any option nowadays. Its been a while since I was involved in options and in incentive awards. (Nowdays, I have to give myself a performance review and usually I reward myself with something outlandish like a fishing reel or a new pair of insulated carharts and a few chainsaw blades.)
That said, I know my compensation was strongly tied to our business plan, I had to deliver on both sales as well as net, and I had to manage the budgets for the business. I had metics applied to all of those as well as the non numeric measurements applied to how well I did by job managing my staff and how well I did in participation on our strategic planning team and the information management team. Each level of compensation was tied to a lot of other things so that we did not have bad long term decisions that were only made to look good for a year or a quarter.
I worked for two outstanding fortune 500s. Both managed extremely well. And both would hang your ass if you did things that were not in the best interest of your sphere of responsibility and not in keeping with the 5 year plan that consistently drove business decisions.
I think you've just been fortunate. Again, you've challenged me to find evidence beyond a sweeping assumption. I don't have direct evidence on the average vesting period but what we are seeing is median compensation going up in a down economy and a high % of cash outs even though the stock market has been struggling. And the overwhelming sentiment on options from credible publications like the Wall Street Journal and HBR consistently say option-based incentives are poorly aligning with shareholder incentives.
Pretty clear that there is a widespread problem. Good news is, some things seem to be working. I don't like Dodd Frank, but "say on pay" seems to be forcing boards to realize they can't just get away with murder and that crony relationships with executives will get them "fired" from the board.