The Advisors' Blog

When companies shift to using a multi-day average stock price to convert target value to the number of shares (a common approach in times of market volatility), I think most recognize the need for clear disclosure to investors of the calculation methodology and reasons for changing approach in the proxy statement. This FW Cook blog highlights the need to consider another type of communication — to program participants.

Use of a multi-day average typically results in a discrepancy between (1) the fair value of awards for proxy tabular disclosure purposes, and (2) the target value communicated to the award recipient. To mitigate potential confusion among recipients, a more detailed internal communication plan may be required to ensure that recipients understand that the discrepancy between their target award value and the value in their stock plan account is due to the design of the program rather than a calculation error.

Certain NEOs are likely to be involved in the change to a multi-day average price, but to the extent the approach represents a change from prior years, you may also need to communicate that change to non-NEO recipients.

– Meredith Ervine