Performance-based equity is the most prevalent form of LTI and makes up a significant portion of total compensation for executives and has even been successfully utilized in a broad-based program. There are numerous steps and decisions to design a program that is motivating to employees and satisfies shareholders desire for alignment.
Infinite Equity has experience designing a wide range of programs that meet company objectives while avoiding decisions that cause administrative complexity or have unintended outcomes. We partner with companies and their compensation advisors in the following areas:
Infinite Equity can evaluate existing LTI arrangements and develop new programs to better align participant behavior with company strategy, shareholder expectations, and the competitive market.
The accounting for performance-based equity under ASC718 and IFRS2 is complex and an important step in the overall process. Infinite Equity ensures companies understand the accounting framework while providing solutions for determining the award’s fair value, drafting accounting memos, and advising on the administrative set-up and procedures needed.
Infinite Equity offers a suite of solutions for ongoing compliance including Probable Assessment for expense recognition of financial metrics, quarterly performance calculations for dilutive EPS purposes, and independent certifications of actual payout for Compensation Committee approval.
Participant line of sight and a general understanding of the award’s current value is critical to ensure the ongoing success of a new performance program. The return on your performance equity will only be maximized through education and communication of value. We have the tools to educate employees and optimize the perceived value of the programs. Learn more about MyPerformanceAwards here.
Performance-based equity should not be limited to only senior management. Designed correctly, a performance equity program that leverages the broad-based appeal of an employee stock purchase plan (ESPP) could be the answer to driving performance and ownership to the rank and file.
Total shareholder return (“TSR”) relative to a group of peers or index continues to be the most prevalent metric utilized in performance-based equity. Learn more about design considerations, valuation and accounting implications, and communication throughout the lifecycle of an award here.