This excerpt taken from the SYMC DEF 14A filed Jul 25, 2006.
We believe that equity compensation is an important tool for the retention of our executive officers and the alignment of their interests with those of the companys stockholders. Stock options, restricted stock units and other forms of equity compensation have typically been granted to our executive officers when the executive first joins Symantec, in connection with a significant change in responsibilities, as part of an annual grant, at other times based upon performance, and occasionally to achieve equitable compensation within a peer group. Stock options have value for the executive only if the price of Symantecs stock increases above the fair market value on the grant date. In addition, equity awards generally have value for the executive only if the executive remains in our employ for the period required for the shares to vest.
When making annual grants of stock options or other equity awards for executive officers, we consider Symantecs corporate performance during the past year and recent quarters, the responsibility level and performance of the executive officer, prior option grants or equity awards to the executive officer and the level of vested and unvested equity awards. The stock options vest over a four-year period, and have exercise prices equal to the fair market value of our common stock on the date of grant under the terms of the stock plan, while restricted stock units granted to executive officers in fiscal year 2006 have variable vesting schedules, including two year cliff vesting and annual vesting over three or four years.
The number of option shares or other equity compensation awards granted by the Committee is within the discretion of the Committee and is based on anticipated future contribution and ability to impact corporate and/or business unit results, past performance or consistency within the executives peer group.
Over the past three years, Symantec has taken specific actions that reflect corporate responsibility and our desire to decrease the total dilution experienced by stockholders as a result of our equity plans. As part of this effort, in July 2004, the Board eliminated the evergreen provision in Symantecs 1998 Employee Stock Purchase Plan, whereby the number of shares available for issuance increased automatically on January 1 of each year by 1% of our outstanding shares of common stock. At the same time, we remain focused on attracting and retaining key personnel to help us solidify our position as the world leader in information integrity through our security and storage management solutions. As a measure of our success in lowering overall dilution and effectively using our option pool, we have lowered the yearly burn rate in the last four consecutive fiscal years, reducing the annual rate down
from 8% to 2% over this period. Burn rate in this context is defined as total shares granted as a percentage of total common stock outstanding at the end of the period reviewed. During this time, our total dilution overhang has decreased from 28% to 14%. Overhang in this context is defined as all options and awards outstanding and available for issuance under all of our equity incentive plans as a percentage of total common stock outstanding at the end of the period reviewed.