The Advisors' Blog

– Broc Romanek

Here’s the intro from this memo by Meridian Compensation Partners:

Given its strong alignment with shareholder value creation, earnings per share (EPS) is a common performance metric selected for short-term incentive and long-term incentive plans. A company’s generally accepted accounting principles (GAAP)-based EPS is equal to its after-tax net income divided by the number of common shares outstanding (either on a basic or fully diluted basis). However, in performance arrangements, companies often use an adjusted EPS performance measure, which is a non GAAP measure. Directors should consider examining the different approaches companies use to develop non-GAAP EPS measures when deciding what’s best for their own company’s compensation program.