As shareholders continue to push for tighter links between pay and performance, Relative TSR plans have surged in popularity. We work with hundreds of clients annually to help them design, implement, manage and value Relative TSR awards that drive peak performance and achieve cost savings.
Responsive Plan Design
Relative TSR plans are complex. While they have tremendous potential to deliver value to both employees and shareholders, they are prone to plan design pitfalls that can bring about significant accounting, legal, performance and valuation headaches. Building a responsive Relative TSR plan, which can stand up to multiple market scenarios, requires the extensive industry knowledge and in-depth testing capabilities that only our team can provide. Our services include:
- Selecting appropriate performance peers (i.e., named peer groups or market indices) based on your specific industry composition and relevant market conditions;
- Determining the appropriate length of performance periods based on your business goals, industry cycles and cost tolerances;
- Developing appropriate plan leverage and payout curves that balance the need to provide meaningful performance incentives with corporate governance concerns and plan cost;
- Advising on strategies to design against the consequences of negative returns, peer group changes, and business changes (including M&A activity and spin-offs);
- Direction on managing global peer groups where currency fluctuations have the potential to significantly alter performance results; and
- Selecting appropriate award calculation methodologies that align with your overall plan decisions and plan complexity.
PeerTracker for Relative TSR Plans
PeerTracker is a cutting-edge online platform for tracking and communicating performance-based awards with Relative TSR metrics. It gives award holders a direct line-of-sight to real-time corporate performance relative to targeted peers, plus insight into their specific compensation outcomes as markets move.
PeerTracker is built to handle the specific plan design requirements of our clients, including plans with multiple absolute and relative metrics, overlapping grant cycles, peers on indices outside the US, and even translations for global award recipients. To learn more, click here.
Valuing performance-based equity awards with Relative TSR metrics requires sophisticated modeling techniques. Our Monte Carlo simulation tools allow clients to quickly and accurately value new grants across multiple plan design types, including market stock units, index out-performance grants and percentile-rank grants.