Getting Dividends Right in TSR Award Design and Tracking

When it comes to designing total shareholder return (TSR) awards, dividends can be an afterthought. But dividends are important to get right, because they’re all too easy to overlook or misunderstand—and they can matter more than you might think.

In this issue brief, we discuss two decisions that companies need to make about dividends in TSR awards. The first is whether recipients should be entitled to dividends or equivalents when dividends are paid during the award’s vesting life. The second decision is how to account for dividends in the TSR calculation. Although distinct, these decisions are easy to conflate.

Learn more about the effect of dividends—and why it’s important to consider these two dividend decisions separately.