5 Mistakes Made With Stock Ownership Guidelines

Although not required to have them, many companies have stock ownership guidelines – these guidelines require officers & directors to own certain levels of stock in their own company. It’s a way to better align your insider’s interests with your shareholders. How to do this?

The stock ownership guidelines that officers have will be a little bit different than what directors have. Officer guidelines typically are expressed as a value equal to a multiple of their base salary – the particular multiple varying by the officer’s position.

For directors, the guidelines might provide that they own a certain number of shares, a fixed dollar value of equity or a value equal to a multiple of their annual cash retainer – if they happen to be paid in cash at all.

Here are 5 things about stock ownership guidelines you should know:

• Make them clear & realistic
• Limit who the guidelines apply to
• Consider outside factors
• Keep directors thinking like owners
• Disclose how guidelines are being met

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