G. Equity

Voting Rights

The holders of Class A Stock and Class B Stock have identical rights except that (i) holders of Class A Stock are entitled to one vote per share, while holders of Class B Stock are entitled to ten votes per share on all matters to be voted on by shareholders in general, and (ii) holders of Class A Stock are not eligible to vote on matters relating exclusively to Class B Stock and vice versa.

Stock Award and Incentive Plan

The Company maintains one Plan approved by the shareholders, which is designed to provide incentives which will attract and retain individuals key to the success of GBL through direct or indirect ownership of our common stock. Benefits under the Plan may be granted in any one or a combination of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents and other stock or cash based awards. A maximum of 6.0 million shares of Class A Stock have been reserved for issuance under the Plan by a committee of the Board of Directors responsible for administering the Plan (“Compensation Committee”). Under the Plan, the committee may grant RSAs and either incentive or nonqualified stock options with a term not to exceed ten years from the grant date and at an exercise price that the committee may determine.

There were no RSAs issued during 2017, 2016 or 2015. As of December 31, 2017 and 2016, there were 19,400 RSA shares and 424,340 RSA shares, respectively, outstanding that were issued at an average grant price of $65.67 per share and $65.74 per share, respectively. The $65.67 per share and $65.74 per share reflect pre AC spin-off stock prices. All grants of RSAs were recommended by the Company's Chairman, who did not receive a RSA, and approved by the Compensation Committee of the Company's Board of Directors. This expense, net of estimated forfeitures, is recognized over the vesting period for these awards which is either (1) 30% over three years from the date of grant and 70% over five years from the date of grant or (2) 30% over three years from the date of grant and 10% each year over years four through ten from the date of grant. During the vesting period, dividends to RSA holders are held for them until the RSA vesting dates and are forfeited if the grantee is no longer employed by the Company on the vesting dates. Dividends declared on these RSAs, less estimated forfeitures, are charged to retained earnings on the declaration date. For RSAs issued by GAMCO prior to the spin-off of AC on November 30, 2015, the Company expenses the portion of the RSAs that correspond to the employee allocation between GAMCO and AC.

During 2015, the Board of Directors accelerated the lapsing of restrictions on the November 2013 grant of RSAs resulting in recognition of $3.5 million in stock compensation expense during 2015 that would have been recorded in 2016 through 2018.

On June 1, 2017, the Compensation Committee of AC accelerated the vesting of all 420,240 AC RSAs outstanding effective June 15, 2017. As a result, GBL recorded an incremental $3.7 million of stock-based compensation expense for 2017. This amount related to GBL teammates who held AC RSAs.

On August 7, 2017, the Compensation Committee of GBL accelerated the vesting relating to 201,120 of GBL RSAs outstanding effective August 31, 2017. As a result, GBL recorded an incremental $1.8 million of stock-based compensation expense for 2017. On December 27, 2017, the Compensation Committee of GBL accelerated the vesting relating to an additional 144,650 GBL RSAs resulting in an incremental $1.3 million of expense in 2017.

During 2016, in accordance with the deferred compensation agreement with Mr. Gabelli for the full year of 2016, the Company issued 2,314,695 RSUs, based upon the VWAP of the Company’s Class A Stock for 2016 of $32.8187, in satisfaction of Mr. Gabelli’s variable compensation of $75,965,266 for 2016. These RSUs will vest 100% on January 1, 2020 and are being expensed ratably over the vesting period. For 2017 and 2016, the Company expensed 25%, or $18,991,316, of this RSU in each year. The Company will pay Mr. Gabelli an amount equal to the number of RSUs valued at the lesser of the VWAP of the Company’s Class A Stock for 2016 or the value on the lapse date. Notwithstanding its ability to settle the award in stock, given the Company’s intent to settle it in cash, in accordance with GAAP (ASC 718), the award is accounted for as a liability-classified award and not as an equity-classified award. The liability is remeasured at fair value on each reporting period from December 31, 2016 until the vesting date. However, given the cap on the obligation in that Mr. Gabelli will not receive cash in excess of the VWAP of the Company’s Class A Stock for the 2016 fiscal year, the remeasurement of the liability at fair value will never exceed its value determined using that VWAP price. Therefore, in accordance with GAAP, the Company marked to market the RSU payable on December 31, 2017 and December 31, 2016 to the closing prices of the Company’s Class A Stock of $29.65 and $30.89, respectively. These mark to market adjustments resulted in a reduction of the RSU expense of $2.6 million and $1.1 million for 2017 and 2016, respectively.

On December 23, 2016, GAMCO entered into a deferred compensation agreement with Mr. Gabelli whereby his variable compensation for the first half of 2017 will be in the form of RSUs determined by the VWAP of the Company’s Class A Stock during the first half of 2017. During 2017, in accordance with the deferred compensation agreement with Mr. Gabelli for the first half of 2017, the Company issued 1,244,018 RSUs, based upon the VWAP of the Company’s Class A Stock for the first half of 2017 of $29.6596, in satisfaction of Mr. Gabelli’s variable compensation of $36,897,086 for that period. The RSUs will vest 100% on July 1, 2018, and the Company intends to settle the award in cash at that time; however, the Company reserves the right to issue shares of the Company’s Class A Stock in lieu of such cash payment. Under the terms of the agreement the Company will pay Mr. Gabelli an amount equal to the number of RSUs valued at the lesser of the VWAP of the Company’s Class A Stock for the first half of 2017 or the value on the lapse date or, if not a trading day, then the first trading date thereafter. For GAAP reporting, the Company will recognize the amount of Mr. Gabelli’s 2017 first half compensation ratably over the vesting period, or approximately 67% of the total during 2017 and 33% during 2018. Notwithstanding its ability to settle the award in stock, given the Company’s intent to settle it in cash, in accordance with GAAP (ASC 718), the award is accounted for as a liability-classified award and not as an equity-classified award. The liability is remeasured at fair value on each reporting period from June 30, 2017 until the vesting date. However, given the cap on the obligation in that Mr. Gabelli will not receive cash in excess of the VWAP of the Company’s Class A Stock for the first half of the 2017 fiscal year, the remeasurement of the liability at fair value will never exceed its value determined using that VWAP price. Therefore, in accordance with GAAP, the Company marked to market the RSU payable on December 31, 2017 to the closing price of the Company’s Class A Stock of $29.65. This mark to market adjustment resulted in a reduction of the RSU expense of $17,000 for 2017.

On September 30, 2017, GAMCO entered into a deferred compensation agreement with Mr. Gabelli whereby his variable compensation for the fourth quarter of 2017 will be in the form of RSUs determined by the VWAP of the Company’s Class A Stock during the fourth quarter of 2017. During 2017, in accordance with the deferred compensation agreement with Mr. Gabelli for the fourth quarter of 2017, the Company issued 530,662 RSUs, based upon the VWAP of the Company’s Class A Stock for the fourth quarter of 2017 of $29.1875, in satisfaction of Mr. Gabelli’s variable compensation of $15,488,708 for that period. The RSUs will vest 100% on April 1, 2019, and the Company intends to settle the award in cash at that time; however, the Company reserves the right to issue shares of the Company’s Class A Stock in lieu of such cash payment. Under the terms of the agreement the Company will pay Mr. Gabelli an amount equal to the number of RSUs valued at the lesser of the VWAP of the Company’s Class A Stock for the fourth quarter of 2017 or the value on the lapse date or, if not a trading day, then the first trading date thereafter. For GAAP reporting, the Company will recognize the amount of Mr. Gabelli’s 2017 fourth quarter compensation ratably over the vesting period, or approximately 17% of the total during 2017, 66% during 2018 and 17% during 2019. Notwithstanding its ability to settle the award in stock, given the Company’s intent to settle it in cash, in accordance with GAAP (ASC 718), the award is accounted for as a liability-classified award and not as an equity-classified award. The liability is remeasured at fair value on each reporting period from December 31, 2017 until the vesting date. However, given the cap on the obligation in that Mr. Gabelli will not receive cash in excess of the VWAP of the Company’s Class A Stock for the fourth quarter of the 2017 fiscal year, the remeasurement of the liability at fair value will never exceed its value determined using that VWAP price. Therefore, in accordance with GAAP, and provided that the closing price of the Company’s Class A Stock of $29.65 was higher than the VWAP price over the fourth quarter of 2017 there was no mark to market adjustment recorded.

A summary of the stock option and RSA activity for the years ended December 31, 2017 and 2016 is as follows:

	Options				RSAs
								Weighted Average
			Weighted Average					Grant Date
	Shares		Exercise Price		Shares			Fair Value

Outstanding at December 31, 2015		-	$	-		553,100		$	64.02
Granted		-		-		-			-
Forfeited		-		-		(9,300	)		64.85
Exercised / Vested		-		-		(119,460	)		57.86
Outstanding at December 31, 2016		-		-		424,340			65.74
Granted		-		-		-			-
Forfeited		-		-		(4,500	)		78.62
Exercised / Vested		-		-		(400,440	)		65.60
Outstanding at December 31, 2017		-	$	-		19,400		$	65.67

Shares available for future issuance at
December 31, 2017		281,349

The total compensation costs related to non-vested awards not yet recognized is approximately $187,000 as of December 31, 2017. This will be recognized as expense in the following periods (in thousands):

2018		2019		2020		2021
$	187	$	-	$	-	$	-

2022		2023		2024		2025
$	-	$	-	$	-	$	-

For the years ended December 31, 2017, 2016 and 2015, the Company recorded approximately $8.7 million, $4.0 million and $9.9 million, respectively, in stock based compensation expense which resulted in the recognition of tax benefits of approximately $3.3 million, $1.5 million and $3.7 million, respectively. The $8.7 million for the year ended December 31, 2017, includes $6.8 million in stock compensation expense as a result of accelerating 345,770 RSAs. The $9.9 million for the year ended December 31, 2015, includes $3.5 million in stock compensation expense as a result of accelerating the November 2013 grant of RSAs. There were no comparable accelerations in the year ended December 31, 2016.

For the years ended December 31, 2015, the Company received approximately $1.2 million from the exercise of stock options which resulted in tax benefits of $0.1 million.

Stock Repurchase Program

In 1999, the Board of Directors established the Stock Repurchase Program through which the Company has been authorized to purchase up to $9 million of Class A Stock. The Board of Directors authorized 500,000, 500,000 and 425,352 shares in August 2015, May 2017 and August 2017, respectively. In 2017, 2016 and 2015, we repurchased 484,526 shares, 348,687 shares and 426,628 shares, respectively, at an average price of $29.56 per share, $30.88 per share and $63.85 per share, respectively. Please note, however, 2015 has not been adjusted for the Spin-off. (For 2015, 413,228 shares were at an average investment of $64.86 per share prior to the distribution of AC on November 30, 2015 and 13,400 shares were at an average price of $32.56 following the distribution of AC.) There remain 674,294 shares available under this program at December 31, 2017.

Dividends

During 2017, 2016 and 2015, the Company declared dividends of $0.08 per share, $0.08 per share and $0.28 per share, respectively, to class A and class B shareholders totaling $2.4 million, $2.4 million and $7.5 million, respectively. Under the terms of the RSA agreements, we accrue dividends, less estimated forfeitures, for RSA grantees from the date of grant but these dividends are held for grantees who are not entitled to receive dividends until their awards vest and only if they are still employed by the Company at those dates. As of December 31, 2017 and 2016, dividends accrued on RSAs not yet vested were approximately $24,000 and $0.4 million, respectively.

Shelf Registration

In April 2015, the SEC declared effective the Company’s “shelf” registration statement on Form S-3 giving the Company the flexibility to sell any combination of senior and subordinate debt securities, convertible debt securities and equity securities (including common and preferred securities) up to a total amount of $500 million. The shelf is available through April 2018, at which time it may be renewed.