In honor of tax time this week, Calcbench decided to take a look at compensation—specifically share-based compensation, one of the more nettlesome reporting issues whether you are a company disclosing information to Wall Street or a person rushing to file your taxes before April 15. Let’s take a look at some of the trends.
Among the S&P 500, the cost of share-based compensation rose 18 percent in the last four years, from $48.6 billion in 2012 to $57.3 billion in 2015. (For comparison purposes, the Dow Jones Industrial Average rose 33.7 percent in that same four-year period.)
The average sum spent per company went from $97.16 million to $114.7 million, but those numbers come with a caveat: 115 businesses in the S&P 500 spent no money at all on share-based compensation from 2012 to 2015. When you strip them out of the sample population, the average yearly numbers are much higher: from $126.2 million in 2012 to $148.9 million in 2015.
Who were the big spenders doling out equity awards? Don’t die of shock here, but all 10 companies that spent the most on share-based compensation hailed from the tech or financial sectors:
|Goldman Sachs||$7.70 billion|
|JP Morgan Chase||$6.95 billion|
|Cisco Systems||$5.31 billion|
|Morgan Stanley||$4.43 billion|
As a whole, the S&P 500 companies also spend more on share-based compensation today relative to revenue, operating income, and operating cash flow than they did four years ago:
|Share-based Comp as % of…||Revenue||Optng. Income||Optng. Cash Flow|
Another way to consider share-based compensation—and probably one more relevant to financial analysts or investors—is to remember that this particular line-item ultimately is listed as an operating expense. So anyone who wants to determine whether a company is spending a questionable amount on share-based compensation could start by looking at the company’s sales and net income. If a company’s expense for share-based comp is rising while sales are flat or income is trending downward, that could be worth a question to management on the next investor call.
Calcbench customers can also use our benchmarking tool to see how your target company’s expenses for this item compare to its peers. Our Normalized Data page lets you build your own peer group, or we have a variety of pre-designed peer groups based on SIC or NAICS codes.
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