Hot Topic: 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.

Current Trends

TSR, ISS, the Proxy, and Our Predictions for 2018

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

6 Steps to Design a Relative Total Shareholder Return Award

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

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

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

Design Attribute Checklist for Relative TSR Awards

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

Getting Your TSR Award Design Details Right

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

Long-Term Incentive Plans: The Universe of Design Possibilities

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.

David Outlaw and Takis Makridis · 7/20/2016

Total Shareholder Return: How Long Is Long Enough?

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

An Introduction to Monte Carlo Valuation for Relative TSR Awards

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.

Josh Schaeffer, PhD and Nathan Vega · 11/18/2016

The Double Leverage Effect of TSR Awards

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

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

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

Calculating Total Shareholder Return

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

TSR Performance Tracking: Managing the Peer List

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

Maximizing Perceived Value of TSR Awards Through Post-Grant Tracking

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