More companies are considering imposing mandatory holding periods on vested awards. They’re a way to help align longer-term incentives between management and shareholders, they make it easier to enforce clawback provisions, and they may even reduce compensation expense via a valuation discount. But post-vest holding periods also are subject to costs that can frustrate key executives and introduce ongoing administrative difficulties.
Equity Methods’ valuation and scenario analyses help compensation teams decide whether to incorporate post-vest restrictions into your equity awards. Specifically, we can do the following:
- Evaluate the pros and cons of adding post-vest holding period restrictions to some or all of the awards granted, including whether those restrictions can give rise to a valuation discount under ASC 718
- Perform pro forma cost estimations of the discount associated with the holding period restriction under various best-of-breed valuation models
- Develop ASC 718-compliant valuations of the post-vest holding period discount
Weigh the tradeoffs of mandatory post-vest holding periods to make the most effective decision for your unique situation.