TSR Essentials

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.

Need more? We’re here to help. Look into our services to assist you with all things TSR or just contact us directly.

Making TSR Design Decisions

4 Compensation Trends to Watch in 2022

Takis Makridis · 12/13/2021

In this blog post, we take inventory of the trends unfolding in executive compensation and our predictions for what we’ll see in 2022.


Why Your TSR Award Value Is Unexpectedly High—and What You Can Do About It

David Outlaw and Alec Katric · 5/3/2021

Why is the fair value of your TSR award so high? In this article, we go over three of the most common reasons, and what you can do about them.


5 Common Grant Agreement Mistakes for TSR Awards

Josh Schaeffer, PhD and Bradley Hayes · 9/10/2020

Failure to consider all of the details when creating an award agreement can lead to imprecise or even incorrect calculations and unintended payouts down the road. As design season approaches, we to highlight the finer points that often go overlooked.


6 Steps to Design a Relative Total Shareholder Return Award

Takis Makridis · 5/23/2019

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.


Design Features that Drive the Fair Value of a Relative Total Shareholder Return Award

Takis Makridis · 12/4/2018

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.


Design Attribute Checklist for Relative TSR Awards

David Outlaw · 12/1/2018

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.


Getting Your TSR Award Design Details Right

David Outlaw and Narine Karakhanyan · 12/2/2016

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.


Long-Term Incentive Plans: The Universe of Design Possibilities

David Outlaw and Takis Makridis · 7/20/2016

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.


Total Shareholder Return: How Long Is Long Enough?

Takis Makridis · 8/31/2015

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.


TSR Award Valuation

Have Your rTSR Fair Values Caught a Fever? Here’s Your Prescription

David Outlaw and James Lecher · 9/6/2022

Find out what’s behind the market-wide spike in relative total shareholder return values, and what you can do to mitigate it in your awards.


An Introduction to Monte Carlo Valuation for Relative TSR Awards

Josh Schaeffer, PhD · 11/18/2016

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.


The Double Leverage Effect of TSR Awards

David Outlaw · 6/30/2015

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.”


Why is the Value of Our TSR Award Greater than the Grant Date Stock Price?

Nathan O’Connor · 11/15/2012

In this 45-minute, on-demand webinar, learn how a relative TSR award can have a value above the grant-date stock price.


Tracking TSR Award Performance After Grant

Calculating Total Shareholder Return

Narine Karakhanyan and Nathan O’Connor · 2/15/2016

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.


TSR Performance Tracking: Managing the Peer List

Narine Karakhanyan · 7/28/2014

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.


Maximizing Perceived Value of TSR Awards Through Post-Grant Tracking

Narine Karakhanyan and Takis Makridis · 5/8/2014

In this on-demand webinar, learn why it’s so important to communicate key details and updates on TSR awards to award recipients.