Total shareholder return (TSR) awards continue to grow in prominence. The newest trend is to combine a TSR provision with one or more financial or operational metrics, giving rise to a “hybrid” award.
With so many moving parts, TSR awards continue to present challenges in their upfront design, grant-date valuation, and post-grant tracking. These difficulties often cascade into the proxy, resulting in unintended pay-for-performance disconnects. Similarly, valuation surprises can negatively impact executive recipients if grant quantities are based on accounting values.
This toolkit provides resources for every stage of the TSR lifecycle, from design and pre-grant modeling to reporting and post-grant tracking.
We recently collaborated with ISS to discuss the roles that TSR metrics have in long-term incentive pay. Read our top ten takeaways.
Takis Makridis · 5/12/2017
Making TSR Design Decisions
Relative total shareholder return has had its share of bad press. But most of its problems are avoidable via a methodical, analytics-based design process.
Takis Makridis · 5/23/2019
Now in its second edition, this issue brief discusses the key design features that drive the fair value of a relative total shareholder return (rTSR) award. Armed with these insights, human resources and accounting executives can plan better and avoid the surprises that this substantially more complex awards structure can generate.
Takis Makridis · 12/4/2018
Relative total shareholder return (rTSR) awards are full of complexity and moving parts. This rTSR award checklist helps both executive compensation and accounting leaders spot potential ambiguities and flush out gaps in their award agreements and downstream tracking processes.
David Outlaw · 12/1/2018
Relative total shareholder return (rTSR) is far and away the most popular metric for performance-based awards. Despite their prevalence, there are so many ways the grant can go sideways and lead to program failure.
David Outlaw and Narine Karakhanyan · 12/2/2016
Today’s long-term incentive program requires a careful balance of shareholder, executive, and accounting interests, all against the back drop of increased compensation committee scrutiny.
Most relative total shareholder return (TSR) programs have performance horizons of just three years. But Is that long enough to achieve your desired shareholder outcomes? Read our article in CFO Magazine.
Takis Makridis · 8/31/2015
TSR Award Valuation
Have you ever wondered exactly how a Monte Carlo simulation model works to value relative TSR awards? In this issue brief, in plain English, we unpack what a Monte Carlo simulation does and how it treats the various features of a TSR award.
This quirk of TSR awards is one of the biggest sources of frustration to recipients and surprise to compensation committees. Finance and accounting leaders can play a key role in educating the compensation function on how the variables in a TSR award can interact to cause surprises. Learn how to manage the effects of “double leverage.”
David Outlaw · 6/30/2015
In this 45-minute, on-demand webinar, learn how a relative TSR award can have a value above the grant-date stock price.
Nathan O’Connor · 11/15/2012
Tracking TSR Award Performance After Grant
Calculation of total shareholder return (TSR) seems fairly straightforward. But many have discovered otherwise, thanks to grant agreements that are full of unique features or fail to spell out the calculation method in adequate detail.
Narine Karakhanyan and Nathan O’Connor · 2/15/2016
This Equity Compensation Issue Brief (ECIB) will equip you with the knowledge necessary to understand complicating factors in post-grant TSR performance tracking, focusing primarily on dealing with changes to peer lists over time.
Narine Karakhanyan · 7/28/2014
In this on-demand webinar, learn why it’s so important to communicate key details and updates on TSR awards to award recipients.
Narine Karakhanyan and Takis Makridis · 5/8/2014