Performance share unit
Also called PSU, performance shares, performance stock units.
An equity award that vests based on performance goals such as relative TSR or EPS. The SCT reports grant-date fair value, which can differ from shares that later actually vest.
What it is
A performance share unit (PSU), sometimes called a performance stock unit or performance share, is an equity award that vests based on performance over a multi-year period—relative total shareholder return, EPS, ROIC, or a scorecard—usually plus continued employment. Payouts are often 0% to 200% of a target number of shares.
SCT Stock Awards typically include the grant-date fair value of the probable or target outcome. A footnote states the maximum. Monte Carlo models are common for market-condition (TSR) awards. Actual shares delivered years later can differ sharply from that estimate.
Why companies use it
Committees use PSUs to claim that a large share of LTI is performance-based. Relative TSR is popular because it is hard to manipulate and easy to benchmark to a peer index.
Proxy advisors and some shareholders prefer PSUs over time-based RSUs for a majority of CEO LTI.
Pros
- Can pay nothing if hurdles are missed.
- Relative TSR pays for beating peers even in a down market, or withholds in an up market the company lagged.
- Multi-year periods match long-term strategy better than an annual cash bonus.
Cons
- Grant-date SCT value is a forecast, not the payout.
- TSR awards can reward a rebound from a depressed grant price or punish a rich starting price.
- Complex modifiers make the CD&A hard to audit from the SCT alone.
Examples
Target vs 200%
Target PSUs valued at $9 million at grant. Three years later the company finishes at the 75th percentile of peers and the award pays 200%. The executive receives about twice the shares; the original SCT line stays $9 million.
Zero vest
Same $9 million in the grant-year SCT. Absolute EPS goals are missed. Zero shares deliver. Reported pay still included $9 million in that earlier year.
On CompensationBase
PSU headers are mapped to Stock Awards. The reported value is the grant-date estimate, which can differ from shares that later vest at 0% or above target.
Related terms
- Stock awards
The grant-date fair value of stock-based awards (typically RSUs, restricted stock, and PSUs) reported in the SCT Stock Awards column.
- Long-term incentive
Multi-year awards, usually PSUs, RSUs, or options, meant to align executives with longer-term results. The full grant-date value still lands in a single SCT year.
- Vesting
The schedule on which an executive earns the right to keep equity. SCT totals use grant-date value, so a large reported year does not mean the shares have vested.
- Pay versus performance
The Item 402(v) proxy disclosure that compares compensation actually paid with company performance measures such as TSR. CompensationBase does not ingest this table.