The challenges facing energy companies across the globe are immense. To name a few: increasing reliance on remote energy sources, and the quest for technological innovation and diversification in the face of climate-change concerns. Add in new market mechanisms, competitive pressures, mergers and an aging workforce. These issues heighten the need for companies to ensure that they attract and retain the very best talent. Some of this assurance is in the form of compensation to provide a competitive edge in recruitment and retention. Recently, many factors have encouraged companies to redesign their equity-based compensation programs-newly emphasized sensitivity to accounting expense, heightened pay scrutiny, conserving cash and controlling stock dilution. But, are these programs really broken? Do companies need to redesign their current stock-based plans to continue to support their strategy just as well or better? And, what impact will changes in equity and long-term incentive compensation for the top executives have on reward strategies for the middle manager and broad-based employee group? How do the changes to the company's stock-based compensation plans affect the global organization? Despite the ongoing public debate, equity incentives remain an integral part of many companies' reward models. Energy companies are increasingly choosing the performance option as they align pay schemes more closely to performance goals. PricewaterhouseCoopers surveyed compensation/rewards-plan specialists, stock-plan administrators and human-resources professionals in the fall of 2004 within 131 multi-national companies that have headquarters in 16 countries. Roughly half of the participating companies have revenues of less than $5 billion; the rest, more than $5 billion. Two-thirds employ between 5,000 and 30,000 people; 19%, more than 30,000; 19%, fewer than 5,000. Among them were representatives of 16 energy companies headquartered in five countries. The survey requested information on different types of equity plans, such as stock-option plans, restricted stock/unit plans, employee stock-purchase plans and stock-appreciation rights. The design and administration of these plans were explored via more than 200 multiple-choice questions. This article explores the latest in strategy and concerns on the subject within energy-company participants. For more on this, see the October issue of Oil and Gas Investor. For a subscription, call 713-993-9325 Ext. 126.
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