The true costs of share-based compensation

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.