A board-ready stock plan health memo, in one pass.

• Single-trigger accelerationNot flagged
• Evergreen plan reserveFlagged

  The plan reserve auto-replenishes each year (commonly 4-5% of shares outstanding). This eliminates the periodic shareholder vote on plan amendments. Public-company shareholders typically vote against evergreen provisions; many private companies use them, then convert at IPO.

• Repricing without shareholder approvalNot flagged
• Share recycling permittedFlagged

  Shares tendered for tax withholding or option exercise return to the plan reserve. Effectively grows the reserve without a shareholder vote. Considered investor-unfavorable.

• Dividend equivalents paid on unvested awardsNot flagged
• Liberal change-in-control definitionNot flagged
• Discounted stock options permittedNot flagged

1. Evergreen plan reserve: Ask legal what the evergreen formula is (percentage of shares outstanding, capped or uncapped, sunset clause). For public companies, plan to convert to a fixed-share reserve at the next plan amendment.
2. Share recycling: Ask finance to quantify the annual share-recycling impact (shares returning to the reserve from tax withholding or option exercises). This understates the true grant rate.
3. Burn rate trajectory: Ask finance for the projected burn rate over the next two fiscal years given hiring plans and refresh cadence. A rising trajectory is a separate concern from the historical figure.
4. Reserve runway: Ask the equity team how many quarters of granting capacity remain in the plan reserve. If under six quarters, plan amendment timing should be on the next Comp Committee agenda.

# Stock Plan Health — Acme Public Co. (sample)

Educational diagnostic prepared for the Compensation Committee. Not a proxy advisor model and not a replacement for ISS, Glass Lewis, or any other proprietary scoring framework. Inputs and outputs reflect public-company practice as of the date the model was run.

## Inputs and assumptions

- **Company stage:** public
- **Annual gross grants (most recent first):** 3,500,000 / 3,000,000 / 2,500,000
- **Weighted-average common shares outstanding (most recent first):** 120,000,000 / 115,000,000 / 110,000,000
- **Common shares outstanding (today):** 122,000,000
- **Awards outstanding:** 9,500,000
- **Shares available for grant:** 6,000,000
- **Plan features tracked:** single-trigger acceleration, evergreen reserve, repricing without shareholder approval, share recycling, dividend equivalents on unvested awards, liberal change-in-control definition, discounted stock options.

## Headline metrics

- **Trailing-year burn rate:** 2.92%
- **3-year average burn rate:** 2.61%
- **Overhang (fully-diluted view):** 11.27%
- **Overhang (investor view):** 12.70%
- **Share reserve runway:** 1.7 years at trailing-year rate, 2.0 years at 3-year average rate

Burn rate is the simple unweighted figure (gross shares granted divided by weighted-average common shares outstanding). ISS Equity Plan Scorecard applies size-weighting factors to options vs full-value awards; the figure here is intentionally before that adjustment so the numbers map cleanly to what you'd report internally.

## Plan feature review

2 flagged features (2 of investor-concern severity):

- **Evergreen plan reserve** — The plan reserve auto-replenishes each year (commonly 4-5% of shares outstanding). This eliminates the periodic shareholder vote on plan amendments. Public-company shareholders typically vote against evergreen provisions; many private companies use them, then convert at IPO.
- **Share recycling permitted** — Shares tendered for tax withholding or option exercise return to the plan reserve. Effectively grows the reserve without a shareholder vote. Considered investor-unfavorable.

## Questions for legal and finance

1. **Evergreen plan reserve:** Ask legal what the evergreen formula is (percentage of shares outstanding, capped or uncapped, sunset clause). For public companies, plan to convert to a fixed-share reserve at the next plan amendment.
2. **Share recycling:** Ask finance to quantify the annual share-recycling impact (shares returning to the reserve from tax withholding or option exercises). This understates the true grant rate.
3. **Burn rate trajectory:** Ask finance for the projected burn rate over the next two fiscal years given hiring plans and refresh cadence. A rising trajectory is a separate concern from the historical figure.
4. **Reserve runway:** Ask the equity team how many quarters of granting capacity remain in the plan reserve. If under six quarters, plan amendment timing should be on the next Comp Committee agenda.

## Recommended next steps

1. **TR leadership.** Walk the headline metrics and flagged plan features against the company's grant philosophy and the most recent investor feedback (proxy vote results, shareholder engagement notes).
2. **Legal.** Confirm any flagged feature against current plan-document language and listing-rule restrictions (NYSE Listed Company Manual; Nasdaq Listing Rule 5635(c)). Confirm the disclosure timeline.
3. **Finance.** Reconcile burn rate and overhang to the latest 10-Q / 10-K. Confirm the dilution forecast lands inside the comp committee's stated tolerance.
4. **Accounting.** Pair this memo with the ASC 718 Expense Forecaster output for the post-flag award population, particularly when a plan amendment is being scoped.
5. **Comp committee handoff.** Bring this memo with the Plan Amendment Impact Modeler output (if applicable) and the Refresh Sizing memo for the full pre-read.

## Disclaimer

ISS-aware, board-ready diagnostic. Not a proxy advisor model. Inputs are typed; the model does not connect to any system of record. Outputs are starting points for conversations with legal, finance, and external advisors. Not legal, tax, or financial advice.