Share-Based Payments, Deferred Compensation and Employee Ownership Plans

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Payments, Deferred Compensation and Employee Ownership Plans

The Company has issued share-based compensation under the 2010 and 2020 Equity Incentive Plan (the "Equity Plans"). The Equity Plans permit the grant of options, restricted shares, restricted stock units, and other equity-based awards to the Company's employees and directors. Stock options granted generally vest over two to five-year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued, both of which are eligible to accrue dividend equivalents, may be immediately vested or may generally vest over a two-to five-year period. Awards are subject to the risk of forfeiture, inclusive of accrued dividend equivalents. As of September 30, 2021, there were 2.7 million shares available for future issuance under only the 2020 Equity Incentive Plan.

Under the Equity Plans, the Company awarded $34.4 million of deferred cash awards to its employees during the nine months ended September 30, 2021. These awards vest over a four-year period and accrue interest at 0.70% per year. As of

September 30, 2021, the Company had unrecognized compensation expense related to the Equity Plans' deferred cash awards of $64.6 million.

The Company measures compensation cost for share-based awards according to the equity method. In accordance with the expense recognition provisions of those standards, the Company amortizes unearned compensation associated with share-based awards on a straight-line basis over the vesting period of the option or award, net of estimated forfeitures. In relation to awards under the Equity Plan, the Company recognized compensation expense of $10.3 million and $11.6 million for the three months ended September 30, 2021 and 2020 and $61.3 million and $35.2 million for the nine months ended September 30, 2021 and 2020, respectively. The income tax effect recognized for the Equity Plans was a benefit of $6.5 million and $3.1 million for the three months ended September 30, 2021 and 2020 and $29.4 million and $8.4 million for the nine months ended September 30, 2021 and 2020, respectively.

Restricted Stock Units Granted to Employees

Restricted shares and restricted stock units are referred to collectively as restricted stock. The following table summarizes the Company's restricted share and restricted stock unit activity for the nine months ended September 30, 2021 and 2020:


	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
	Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock Units	Weighted-Average Grant Date Fair Value		Nonvested Restricted Class A Common Shares and Class A Common Restricted Stock Units	Weighted-Average Grant Date Fair Value





Beginning balance outstanding	5,450,191	$	17.56	5,364,486	$	16.67
Granted	1,714,646	35.15		2,638,544	17.14
Vested	(1,425,327)	16.36		(1,320,318)	15.20
Canceled	—	—		(87,348)	14.80
Forfeited	(162,218)	22.23		(111,212)	15.55
Ending balance outstanding	5,577,292	$	23.14	6,484,152	$	17.20

Included in the restricted share and restricted stock unit activity are performance-linked restricted stock units of 1,603,630 which were awarded in March 2016, April 2019, July 2020 and February 2021. Each RSU is equal to one share of the Company's Class A common stock. Certain of the awards granted have the ability to be cash settled when the attained award exceeds a certain percentage of granted amount. The cash portion of the award has been bifurcated from the equity component and recorded as a compensation payable in the accompanying condensed consolidated statement of financial condition. Of the awards granted, 379,319 have vested and 320,681 have been canceled, as they did not meet the performance criteria, through September 30, 2021. Included in vested shares are 233,333 shares that had an attainable value of 420,000, due to reaching certain performance goals, and were delivered in March 2021. Of this attainable value 350,000 shares were settled in the issuance of restricted stock units and were delivered in March 2021 with the remaining 70,000 shares being settled in cash at the volume weighted average price on settlement date. The remaining awards, included in the outstanding balance as of September 30, 2021, vest between December 2021 and December 2023 and will be earned only to the extent that the Company attains specified market conditions relating to its volume-weighted average share price and total shareholder return in relation to certain benchmark indices and performance goals relating to aggregate net income and average return on shareholder equity. The actual number of RSUs ultimately earned could vary from zero, if performance goals are not met, to as much as 220% of the targeted award. Compensation expense is recognized to the extent that it is probable that the Company will attain the performance goals. The fair value of restricted stock is determined based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.

As of September 30, 2021, there was $85.6 million of unrecognized compensation expense related to the Company's grant of nonvested restricted shares and restricted stock units to employees. Unrecognized compensation expense related to nonvested restricted shares and restricted stock units granted to employees is expected to be recognized over a weighted-average period of 1.81 years.

Restricted Shares and Restricted Stock Units Granted to Non-Employee Board Members

There were no restricted stock units awarded to non-employee board members during the three and nine months ended September 30, 2021. There were 90,465 restricted stock units awarded to non-employee board members during the three and nine months ended September 30, 2020. The Company delivered 27,047 and 41,667 units to non-employee board members during the three and nine months ended September 30, 2021, respectively, and 48,021 were delivered during the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020, there were 217,869 and 259,536 restricted stock units outstanding for non-employee board members, respectively.

Other Share Based Payments

In certain circumstances, the Company grants carried interest in consolidated managing member/general partner subsidiaries to third parties through the grant of equity awards in exchange for professional, advisory and other services. The equity awards are recorded within additional paid in capital in the accompanying condensed consolidated statements of financial condition and professional, advisory and other fees expense in the accompanying condensed consolidated statements of operations based on the fair value of the award granted and expensed over the terms of the award. In addition, the equity awards provide the third parties profit points aligned to the allocated carried interest distributions. Upon vesting of the awards, the third parties' allocation of carried interest is determined by applying an equity ownership model. Accordingly, the Company accrues carried interest allocations based on the fair value of the underlying investments assuming hypothetical liquidation at book value upon vesting as nonredeemable non-controlling interest.