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This is financial whimsy and some of you will be quite bored, but here is a real life example where I was tracking the price of a stock very closely over the last several weeks and every 30 mins or so throughout the day today. It also illustrates one of many incentive-based methods for which non-MD professionals receive their compensation.
The set up is that my wife works for a Fortune 500 company (Company A), and part of her compensation is incentive-based, a stock grant, which is allocated at the beginning of a year and vests over three years, to be paid out in the spring of the following year (Year 4). The kicker is that the pay out can be modified, up or down, depending on the three calendar year performance of Company A's stock, compared to a pre-defined group of peer companies. In 2016, the 2013 shares were granted at 200% (meaning twice the allocated shares), and my wife had easily her highest earning year ever.
Well, this year it was really down to the wire. In order to receive 100% stock compensation, Company A has to have a three year trailing return in the top half of the peer group. Otherwise, the stock allocation is 50%. I checked the three year trailing returns of her company and the peer group on 12/26/16, and the results were as follows.
Company A (wife's company)--17.00% annualized, and just barely inside the top 50%.
Company B -- 16.86%
Company C -- 16.76%
Last night (12/29/16), I checked the stock prices and was disappointed to see the following:
Company B -- 17.14%
Company C -- 17.14%
Company A -- 16.92% My wife's company was now in the bottom half. Bummer!
Today, I was following the price action all day long, and the day ended with all three down but B and C were down considerably more than A. I thought we were back on top. When I checked the Morningstar returns, it showed the following:
Company B -- 16.87%
Company C -- 16.82%
Company A -- 16.68% Again, my wife's company fell (barely) in the bottom half. So close. We will have to wait for the final tally and analysis by an independent accounting firm (I am hopeful that today's dividend distribution still needs to be accounted for) , but if my analysis is correct, we would have add a 100% grant (about $120k) on Monday morning, but as of Friday evening, we are looking at half of that (still better than a sharp stick in the eye!) after a very modest decline in the stock price and virtually negligible difference between the competing companies in the upper half of the group!
The set up is that my wife works for a Fortune 500 company (Company A), and part of her compensation is incentive-based, a stock grant, which is allocated at the beginning of a year and vests over three years, to be paid out in the spring of the following year (Year 4). The kicker is that the pay out can be modified, up or down, depending on the three calendar year performance of Company A's stock, compared to a pre-defined group of peer companies. In 2016, the 2013 shares were granted at 200% (meaning twice the allocated shares), and my wife had easily her highest earning year ever.
Well, this year it was really down to the wire. In order to receive 100% stock compensation, Company A has to have a three year trailing return in the top half of the peer group. Otherwise, the stock allocation is 50%. I checked the three year trailing returns of her company and the peer group on 12/26/16, and the results were as follows.
Company A (wife's company)--17.00% annualized, and just barely inside the top 50%.
Company B -- 16.86%
Company C -- 16.76%
Last night (12/29/16), I checked the stock prices and was disappointed to see the following:
Company B -- 17.14%
Company C -- 17.14%
Company A -- 16.92% My wife's company was now in the bottom half. Bummer!
Today, I was following the price action all day long, and the day ended with all three down but B and C were down considerably more than A. I thought we were back on top. When I checked the Morningstar returns, it showed the following:
Company B -- 16.87%
Company C -- 16.82%
Company A -- 16.68% Again, my wife's company fell (barely) in the bottom half. So close. We will have to wait for the final tally and analysis by an independent accounting firm (I am hopeful that today's dividend distribution still needs to be accounted for) , but if my analysis is correct, we would have add a 100% grant (about $120k) on Monday morning, but as of Friday evening, we are looking at half of that (still better than a sharp stick in the eye!) after a very modest decline in the stock price and virtually negligible difference between the competing companies in the upper half of the group!
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