15.05.2020 - Studies

The true costs of share-based compensation


[Translate to English:]
[Translate to English:]

The share-based compensation programs of large corporations often incur immense costs. The true costs of these programs are not reflected by the income statements.

 

US companies in the S&P 100 run very extensive share-based payment programs. The extent of these compensation programs is not adequately reflected by the applicable accounting rules. In the period from 2006 to 2019, for example, the S&P 100 companies’ shares with a value of USD 1.4 tn. were transferred to the management, of which only USD 0.7 tn. were reported in the income statements.

The present analysis shows the actual cost of share-based compensation, the dilution that results from the grant and the possibilities to adequately reflect the actual cash outflows in the valuation of the company.

This study is available in German only.

Legal notice

The information contained and opinions expressed in this document reflect the views of the author at the time of publication and are subject to change without prior notice. Forward-looking statements reflect the judgement and future expectations of the author. The opinions and expectations found in this document may differ from estimations found in other documents of Flossbach von Storch AG. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. This document does not constitute an offer to sell, purchase or subscribe to securities or other assets. The information and estimates contained herein do not constitute investment advice or any other form of recommendation. All information has been compiled with care. However, no guarantee is given as to the accuracy and completeness of information and no liability is accepted. Past performance is not a reliable indicator of future performance. All authorial rights and other rights, titles and claims (including copyrights, brands, patents, intellectual property rights and other rights) to, for and from all the information in this publication are subject, without restriction, to the applicable provisions and property rights of the registered owners. You do not acquire any rights to the contents. Copyright for contents created and published by Flossbach von Storch AG remains solely with Flossbach von Storch AG. Such content may not be reproduced or used in full or in part without the written approval of Flossbach von Storch AG.

Reprinting or making the content publicly available – in particular by including it in third-party websites – together with reproduction on data storage devices of any kind requires the prior written consent of Flossbach von Storch AG.

© 2020 Flossbach von Storch. All rights reserved.