Stock-Based Compensation

The Company's 2012 Heidrick & Struggles GlobalShare Program ( the "2012 Program') provides for grants of stock options, stock appreciation rights and other stock-based awards that are valued based upon the grant date fair value of shares. These awards may be granted to directors, selected employees and independent contractors. The 2012 Program originally authorized 1,300,000 shares of Common Stock for issuance pursuant to awards under the plan.

On May 22, 2014, the stockholders of the Company approved an amendment to the 2012 Program to increase the number of shares of Common Stock reserved for issuance under the 2012 Program by 700,000 shares. On May 24, 2018, the stockholders of the Company approved an amendment to the 2012 Program to increase the number of shares of Common Stock reserved for issuance under the 2012 Program by 850,000 shares. As of December 31, 2018, 2,149,864 shares have been issued under the 2012 Program and 1,375,105 shares remain available for future awards, which includes 674,969 forfeited shares. The 2012 Program provides that no awards can be granted after May 24, 2028.

In September 2017, the Company entered into an agreement with its former Chief Executive Officer pursuant to which Mr. Wolstencroft voluntarily agreed, with the concurrence of the Board of Directors, to forfeit 100 percent of his 2017 restricted stock unit and performance stock unit grants. Mr. Wolstencroft remains eligible to continue vesting in 100 percent of his 2014 sign-on restricted stock unit grant, without proration, subject to his continued service on the board through the future scheduled vesting dates. With respect to his outstanding 2015 and 2016 restricted stock unit and performance stock unit grants, Mr. Wolstencroft remains eligible to earn an agreed upon pro-rata portion of the tranches scheduled to vest in 2017, 2018 and 2019, subject to his continued service as a director through the scheduled vesting dates (and with the performance goals for performance stock units deemed to have been achieved at target level performance), and he agreed to forfeit the remaining portions of such 2015 and 2016 restricted stock unit and performance stock unit awards.

The Company measures its stock-based compensation costs based on the grant date fair value of the awards and recognizes these costs in the financial statements over the requisite service period.

A summary of information with respect to stock-based compensation is as follows:



	December 31,
	2018		2017		2016
Salaries and employee benefits (1)	$	9,548	$	4,597	$	5,830
General and administrative expenses	562		338		563
Income tax benefit related to stock-based compensation included in net income	2,674		1,948		2,523

(1) Includes $1.2 million of expense related to cash settled restricted stock units for the year ended December 31, 2018.

Restricted Stock Units

Restricted stock units are generally subject to ratable vesting over a three-year period. Beginning in 2018, a portion of the Company's restricted stock units are subject to ratable vesting over a four-year period. Compensation expense related to service-based restricted stock units is recognized on a straight-line basis over the vesting period.

Restricted stock unit activity as of December 31, 2018, 2017 and 2016 is as follows:



	Number of Restricted Stock Units		Weighted- Average Grant-date Fair Value
Outstanding on December 31, 2015	473,935		$	19.98
Granted	207,405		22.92
Vested and converted to common stock	(119,455	)	20.02
Forfeited	(24,612	)	22.81
Outstanding on December 31, 2016	537,273		20.97
Granted	243,306		24.18
Vested and converted to common stock	(217,028	)	21.39
Forfeited	(72,397	)	24.05
Outstanding on December 31, 2017	491,154		21.92
Granted	297,664		34.64
Vested and converted to common stock	(199,550	)	21.66
Forfeited	(76,822	)	25.76
Outstanding on December 31, 2018	512,446		28.83

As of December 31, 2018, there was $5.9 million of pre-tax unrecognized compensation expense related to unvested restricted stock units, which is expected to be recognized over a weighted average of 2.6 years.

Performance Stock Units

The Company grants performance stock units to certain of its senior executives. The performance stock units are generally subject to a cliff vesting at the end of a three-year period. The vesting will vary between 0% - 200% based on the attainment of operating income goals over the three-year vesting period. The performance stock units are expensed on a straight-line basis over the three-year vesting period.

Performance share unit activity as of December 31, 2018, 2017 and 2016 is as follows:



	Number of Performance Stock Units		Weighted- Average Grant-date Fair Value
Outstanding on December 31, 2015	272,024		$	18.28
Granted	125,388		22.98
Vested and converted to common stock	(160,600	)	15.51
Forfeited	—		—
Outstanding on December 31, 2016	236,812		22.64
Granted	88,415		23.83
Vested and converted to common stock	(70,652	)	19.65
Forfeited	(68,684	)	24.07
Outstanding on December 31, 2017	185,891		23.82
Granted	102,138		25.81
Vested and converted to common stock	(43,361	)	23.64
Forfeited	(47,551	)	23.87
Outstanding on December 31, 2018	197,117		24.88

As of December 31, 2018, there was $2.0 million of pre-tax unrecognized compensation expense related to unvested performance stock units, which is expected to be recognized over a weighted average of 2 years.

Phantom Stock Units

Phantom stock units are grants of phantom stock with respect to shares of the Company's common stock that are settled in cash and are subject to various restrictions, including restrictions on transferability, vesting and forfeiture provisions. Shares of phantom stock that do not vest for any reason will be forfeited by the recipient and will revert to the Company.

During the year ended December 31, 2018, phantom stock with respect to 111,673 shares of common stock were granted to certain employees of the Company, and are subject to vesting over a period of 4 years and certain other conditions, including continued service to the Company. As a result of the cash-settlement feature of the awards, the Company considers the awards to be liability awards, which are measured at fair value at each reporting date and the vested portion of the award is recognized as a liability to the extent that the service condition is deemed probable. As of December 31, 2018, the Company has recorded a liability of approximately $1.2 million related to the phantom stock units, which is recorded in non-current Accrued salaries and employee benefits in the Consolidated Balance Sheets. The fair value of the phantom stock awards as of December 31, 2018, was determined using the closing share price of the Company's common stock on that date.

Phantom stock unit activity as of December 31, 2018 is as follows:



	Number of Phantom Stock Units
Outstanding on December 31, 2017	—
Granted	111,673
Vested	—
Forfeited	—
Outstanding on December 31, 2018	111,673

Expense associated with the phantom stock units was $1.2 million for the year ended December 31, 2018. As of December 31, 2018, there was $2.0 million of pre-tax unrecognized compensation expense related to unvested phantom stock units, which is expected to be recognized over a weighted average of 3.6 years. No phantom stock units were granted during the years ended December 31, 2017 and 2016.