Performance-based awards are one of the hottest trends in stock compensation today. According to a recent study by the National Association of Stock Plan Professionals, usage of these awards has surged by almost 200% in the past decade and already surpasses usage of service-based stock options for executives and senior managers.
There are many reasons for this increase, but there are two key factors that we believe are most responsible for the trend. First are United States accounting standards, which changed in 2005 to treat performance-based awards similarly to service-based awards. Before this change the financial consequences of performance awards discouraged adoption.
