Raising the Stakes at BB&T Corporation__»

June 28, 2010

Last Friday, BB&T Corporation (BBT) filed an 8-K to disclose that the company’s 10-member executive management group had each received —a special, one-time award of performance-based restricted stock units. That group includes Chairman/CEO Kelly King, Senior Executive VP Robert Greene, Senior Executive VP C. Leon Wilson III, COO Christopher Henson, and CFO Daryl Bible, as well as five unnamed top members of the executive management team.

It’s an arrangement that tries to balance reward and performance and does so perhaps more successfully than the methods we typically see at other companies.

The Table below shows what each NEO got:

In most cases, the performance awards will vest on a cliff basis ——only if both (a) a three-year corporate performance goal is met and (b) the executive remains employed by the Company for five years after the grant of the Performance Award—.

The company plans to use a metric identified as —average GAAP return on common equity (ROCE), but it may make adjustments if there are unusual and/or nonrecurring items. To achieve the award’s performance vesting component, the company’s average ROCE over a three-year period must beat the median of BB&T’s peer group. And even if the company achieves that performance goal, the recipients must remain employed with BB&T for five years. The awards in question will be forfeited if either the company fails to reach its corporate performance goals or if an executive leaves the company before June 22, 2015.

Although BB&T calls this a —special, one-time award, other incentive stock awards have long been a part of the company’s compensation practices (in fact, reference is made to the 2004 Amended and Restated Stock Incentive Plan). In the proxy that BB&T filed March 8, 2010, page 39 shows that the NEOs received options and RSUs for 2009 that ranged from King’s $1,322,987 award down to Bible’s award of $293,999.

This new award, the company states, is designed to motivate the leadership team so that it produces —sustained superior ROCE results that, in turn, boost BB&T’s earnings and the value of its stock. The company also believes that the awards will give its executives a reason to stay with the company and —provide valuable leadership and services to the Company.

While the outcome remains to be seen, we think the —all or nothing nature of this plan may be a win-win for shareholders. If the conditions are met, everyone benefits. And if they aren—t met, the shareholders aren—t paying for something they didn—t get.

Image source: Ross Elliott via Flickr

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