Glass Lewis assesses U.S. equity-based compensation plans in the context of potential equity value creation, utilizing an in-house model that evaluates plans based on three categories: program size and granting history; program cost; and program features.
Following an extensive off-season review of this model, Glass Lewis has updated certain analyses, rules and calculations. These changes include the following:
- Improved the test that measures the dilutive effects of a company’s past granting history in order to incorporate a three-year weighted average dilution calculation.
- Removed the cost per employee test used in the program cost analyses.
- Added a relative overhang test to better capture the dilutive effects of company equity programs when compared to a specified peer group.
- Modified the valuation process of full-value awards to now use the average of a company’s closing share price over the last four quarters.
- Other internal modifications and adjustments.
Glass Lewis regularly reviews the methodologies and analyses utilized in our research. Through engagement with issuers and stakeholders, outreach at seminars and conferences, and evaluation of data and information collected throughout the year, among other considerations, Glass Lewis formulates new ideas and perspectives on the issues we cover.
After considerable back-testing and evaluation of these new techniques, Glass Lewis has determined that the revised methodology provides a more balanced approach in measuring dilution and cost, and incorporates a longer term assessment of a company’s granting history. These changes provide our analysts and clients with refined tools for examining equity-based compensation programs.
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