The Benefits of Optimizing Your ESPP
By increasing employee engagement, ESPPs boost overall corporate performance. ESPPs are broad-based programs that provide companies with a cost-effective way to extend ownership opportunities to their employees. While that sounds great on paper, the real benefits of ESPPs only come when they are correctly optimized and tailored to your company’s specific situation. If your ESPP…
ESPP Accounting 101
Everything you want to know about how to account for ESPPs. Under ASC 718, compensation expense for employee stock purchase plans (“ESPPs”) must be recognized in a company’s financial statements. The only exception is a plan that is considered “non-compensatory” – which means it does not contain a look-back feature nor have a discount over…
ESPP Valuation – 4 Missing Pieces
You may be overvaluing your ESPP expense. Current Market Practice ESPPs are valued based on their plan design features, which frequently results in multiple components to estimate the fair value. The accounting requirements under ASC Topic 718 point to guidance from FTB 97-1: Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a…
“Cadillac” ESPP Considerations: What You Need to Know Before Adopting
Balance this exceptional employee benefit with compliance and administrative ease. Introduction Employee Stock Purchase Plans (ESPPs) are common among public companies, and it is easy to see why. On the participant side, ESPPs allow a large population of employees to build wealth through the purchase of company stock, typically at a discount to the market…
10 Ways the Recent Market Volatility and Overall Uncertainty Can Impact Your Equity Plans
The COVID-19 pandemic has disrupted nearly every daily norm and has caused extreme market volatility that is likely to continue for the foreseeable future. There are countless ways that high volatility and depressed stock prices can impact the success of your company’s equity plans; here are ten items to keep in mind during these turbulent…
What Is Monte Carlo Simulation?
Performance Share plans that are contingent on Relative Total Shareholder Return (“RTSR”) continue to gain in prevalence. However, the accounting rules under ASC 718 create financial reporting needs on the date of grant, as it is considered a market condition, and will generally require a Monte Carlo simulation. (For a full primer on performance award…
The Grant Sizing Challenge
Once your organization decides that it’s going to grant performance shares contingent on Relative Total Shareholder Return (“RTSR”), one of the first and most impactful decisions is how you’re going to determine the “target” grant size. Generally, there are three (3) broad methodologies for doing so: Methodology 1: Share Price – The current share price…
Multiple Performance Metrics
Performance shares earned contingent on performance metric of Relative Total Shareholder Return (“RTSR”) are the most prevalent in the global marketplace. Further, recent studies show that an average of 2.1 different metrics were utilized in the typical CEO performance plan in 2018. However, there are distinct approaches for incorporating multiple metrics into a long-term incentive…