Takis Makridis
President & CEO
Equity compensation is used to attract, retain, and motivate key talent to drive the organization’s strategy. When equity grants lose their value or a series of performance targets becomes unachievable, problems arise:
Meanwhile, corporate governance realities have become starker than ever. Amid rising sentiment that executives should “share the pain” with shareholders, the time may come for bold and decisive compensation action. If so, it needs to occur through a governance lens that considers the shareholder base.
We help HR executives identify and resolve crumbling incentives—something that can happen during down markets or anytime the organization’s strategy is disrupted, prompting a pivot to a new direction. Our capabilities span the entire journey, from upfront considerations to proxy disclosures.
Assess the merit of adopting a relative performance metric
Restore lost value to underwater PSUs
Complete an option exchange program
Support post-termination exercise window extensions for terminated employees
Model share pools and support preservation strategies
Modernize participant communications
Analyze and evaluate buyout package strategies
Relative metrics aim to provide insulation against exogenous shocks such as pandemics, supply shocks, runaway inflation, or geopolitical instability. We help companies evaluate and implement a relative metric by doing the following:
For more on our approach, please see our award design services.
For most companies, performance goals set in the past few years are appearing utterly unachievable. To restore incentives while taking shareholders into consideration, we develop a menu of value restoration strategies, including:
— Test the pros and cons of each approach by modeling pay and cost scenarios
— Compile market and other data to support decision-making
— Collaborate with legal counsel, proxy solicitors, and the board’s consultant to drive implementation
— Perform all the valuation and accounting required under ASC 718, including support to the external audit team
Highly popularized during prior recessions, option exchanges allow employees to surrender eligible underwater options for a lesser quantity of at-the-money options, RSUs, or cash. An option exchange can be structured in diverse ways to meet the varying needs of employees, proxy solicitors, and financial reporting.
We assist through all stages of an option exchange by doing the following:
As reductions in force and involuntary terminations take place, many companies wish to extend the standard option post-termination exercise window so the terminated employee has more time to monetize their vested stock options. We provide the following support:
Declining share prices raise the risk of running out of shares. Scenario-based modeling provides advanced visibility, while creative award design can create a bridge until a share pool request gains shareholder approval. We can assist in the following ways:
— A hybrid equity/cash program limited either by participant level or by how much of an award can be settled in equity
— Conditional equity awards that begin as cash but convert to equity upon obtaining shareholder approval
More than ever, crisp, clear, and plain-English communication is critical so that equity participants understand and value their incentives. We assist in all facets of participant communications. For instance, we:
Periods of economic turbulence create opportunities for companies to acquire top talent at “bargain” prices because the value of unvested equity may be depressed. We help companies, and occasionally executives, quantify the value of unvested holdings to determine the attractiveness of a buyout package.
We can assist in the following ways:
— Strict GAAP-based valuation
— Adjusted GAAP valuation
— Intrinsic value valuation
— Scenario-based valuation
We welcome a chance to discuss your needs, either formally or informally.
Contact usPresident & CEO
Managing Director, Valuation & HR Advisory Services
Managing Director, Valuation & HR Advisory Services