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Holding Period Discounts

The number of companies adopting mandatory post-vest holdings periods for equity awards is on the rise. While most holding periods are put in place with corporate governance aims in mind, holding periods can provide accounting cost savings that most companies never fully realize. 

Maximizing Your Investment in Equity Compensation

Valuation Services

Holding periods can do far more than create a culture of equity ownership, but only if they are designed to comply with a detailed set of corporate governance and accounting requirements. Our team works with clients to unlock the hidden value of holding periods in the following ways:

  • Developing holding periods that explicitly define pathways for award recipients to meet ownership guideline requirements;
  • Advising clients on the design of holding periods that comply with required elements of IRC Section 423 in order to deliver favorable tax positions to award holders;
  • Generating market-tested discounts for the lack of marketability (DLOM) that can be applied to award valuations to reduce compensation expense under ASC Topic 718 or IFRS 2, assuming holding requirements meet applicable account requirements;
  • Ensuring that holding periods create a viable pathway for the recovery of vested awards in the event of a compensation claw back; and
  • Working with clients to assess whether holding periods, as currently designed, qualify for improved governance ratings from key proxy advisor firms who view the use of holding periods as a risk-mitigating practice.

To learn more about how mandatory post-vest holding requirements can help your organization maximize its investment in equity compensation while also being a good corporate citizen at the same time, please click here.