Press Posted on: 8/31/2015
Total Shareholder Return: How Long Is Long Enough?,” an article by Equity Methods CEO Takis Makridis and Eric Hosken of Compensation Advisory Partners, appears in CFO Magazine today.
According to the authors, executive compensation programs once emphasized stock options with 10-year performance horizons. Today, these programs have evolved to performance-based restricted stock with mid-term performance horizons—usually just three years long. And the most popular mid-term plan performance measure is relative total shareholder return (TSR).
But is three years long enough for an effective TSR performance period? What, exactly, is the relationship between TSR performance measures and shareholder outcomes? Read the article to learn more about what finance executives can do to arrive at an optimal TSR award design.