Equity Incentive Analytics (EIA) leverage Gradient's array of proprietary models and databases to sort through the complexities of issues that impact equity compensation. Our objective is to provide early indications of future stock returns by relying on proprietary research and academic evidence that demonstrates a relationship between stock performance and equity compensation factors.
Our analysts evaluate how companies design their incentives; how they grant options (including such aspects as pre-SOX back-dating and post-SOX spring-loading); how they expense and account for options (under new and old accounting regulations); and, ultimately, we evaluate how executives use their incentives. Areas analyzed include:
- The timing and magnitude of option exercise and sale decisions
- Whether or not executives at a given firm have a history of well-timed trades
- The use of hedging instruments
- The nature of sales made under 10b5-1 trading plans
Analysts also investigate the compensation committee and related governance issues. We believe that a company's procedures and controls (e.g., decisions about grant timing and accounting treatment) help to determine whether equity incentives are effective at aligning the interest of shareholders and recipients, or are merely motivating executives to control the timing of financial and other information to maximize their personal wealth.
EIA research manifest in a series of analyst-written, company-specific Alerts, Snapshots, and Notes.
- EIA Alerts announce the initiation of coverage of a particular company. Each Alert contains a grade (using an A to F scale) that considers equity incentives and fundamental- and valuation-based signals in formulating an overall positive or negative view about the company’s future stock returns.
- EIA Snapshots leverage the signals generated by our proprietary screens and models that our analysts use to determine Equity Incentive metrics of interest. Ratings of Positive, Neutral or Negative are assigned to summarize our perspective of noteworthy EIA metrics.
- EQA Research Notes provide updates on previous coverage and are generally published after earnings announcements, financial statement filings, or other noteworthy events.