After the I.P.O., a Billion-Dollar Bill for Employee Paydays
A compensation strategy at start-ups keeps expenses low until they go public. At that point, the companies may face billions of dollars in catch-up expenses.
CEI’s John Berlau was cited in an article from the New York Times regarding the allegation that companies tailor information to make financial futures appear positive before going public on stock markets.
Not everyone agrees with Riethmueller’s recommendation to proactively recognize double-trigger R.S.U. expenses on a company’s accounts before it goes public.
“Maybe the S.E.C. and other regulatory bodies should consider, or companies should consider, if there are better ways to disclose this as a risk,” John Berlau, the director of finance policy at the Competitive Enterprise Institute, said. “But I don’t think it’s accurate accounting to count this against earnings.”
The period Riethmueller examined ended in 2024, but he expects the use of catch-up expenses to continue. In fact, the problem may be about to get worse, he said: If the S.E.C. follows through on its proposal to allow semiannual rather than quarterly financial reporting, it could delay the “R.S.U. reckoning” even further after a company goes public.
Read the full article at the New York Times.