Sample Performance Share Unit Plans

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Document Header

Item	Details
Document Title	Performance Share Unit Plan (PSU) – <Company Name>
Document Type	Performance Share Unit Plans
Category	Variable Compensation
Version	<Version Number>
Effective Date	<Effective Date>
Last Review Date	<Last Review Date>
Next Scheduled Review	<Next Review Date>
Plan Sponsor	<Company Name> – Total Rewards
Plan Owner	<Plan Owner Name/Title>
Plan Administrator	<Vendor Name> and <Internal Function>
Approving Bodies	Board of Directors, Compensation Committee, <Executive Committee Name>
Applicable Entities	<Company Name Legal Entities> in <Country/Region List>

Purpose and Objectives

• Define the design, governance, and administration of the Performance Share Unit (PSU) plan at <Company Name>.
• Align executive and key talent rewards with long-term value creation and shareholder outcomes.
• Reinforce a pay-for-performance culture through multi-year goals and measurable outcomes.
• Support talent attraction, retention, and internal equity across <Company Name>.
• Ensure compliance with applicable laws, regulations, and financial reporting requirements in <Country/Region>.

Scope and Applicability

In Scope

• PSU awards granted to eligible employees of <Company Name> and participating affiliates.
• Annual PSU grant cycle, off-cycle awards, and replacement awards for new hires and promotions.
• Plan design elements including performance metrics, goals, measurement, vesting, payout, and settlement.
• Global administration, accounting, taxation, data privacy, and securities law considerations.
• Treatment of employment status changes, leaves of absence, and corporate transactions.

Out of Scope

• Time-based Restricted Stock Units (RSUs), Stock Options, Cash Long-Term Incentives, and Short-Term Incentive plans.
• Sales incentive plans and commission structures.
• Non-employee director equity plans, unless explicitly adopted by the Board.

Plan Overview

Philosophy

• PSU awards motivate sustained performance over a multi-year horizon, typically <3> years.
• Awards are earned based on achievement against pre-set strategic and financial metrics.
• Payouts vary from 0 percent to <200 percent> of target based on performance outcomes, with a typical cap at <200 percent>.

Award Vehicle

• PSUs are notional performance-based equity units that settle in <Company Name> common shares or in cash at the Company’s discretion.
• The plan anticipates settlement in shares unless prohibited by local law or plan design specifies cash.

Share Reserve and Dilution Guardrails

• PSU share usage draws from the <Company Name> equity incentive plan reserve approved by shareholders on <Date>.
• Annual burn rate target of <Percentage> of weighted average common shares outstanding.
• Overhang not to exceed <Percentage> absent explicit Board approval.

Definitions

• PSU: A performance share unit that converts into shares based on performance results.
• Target Award: The initial number of PSUs granted, before performance adjustment.
• Performance Period: The multi-year period (typically <3> years) over which metrics are measured.
• Vesting Date: The date PSUs become eligible to settle after certification of results.
• TSR: Total Shareholder Return, measured against <Index/Peer Group>.
• Relative TSR: Company TSR measured relative to a defined comparator group.
• Absolute Metric: A metric measured against an internal target (e.g., revenue, EPS, free cash flow).
• Certified Results: Performance outcomes approved by the Compensation Committee.
• Change in Control: Defined transaction event as specified in the <Equity Plan/Agreement>.
• Retirement: As defined by <Company Name> policy (e.g., age <Age> with <Years> years of service).

Eligibility

• Eligible populations include executives, senior leaders, and critical talent at grades <Grade Levels>.
• Employees must be actively employed by <Company Name> or on eligible leave status on the grant date.
• Employment classification and eligibility are determined by <Company Name> HR on the grant date.
• Contractors, interns, and temporary workers are not eligible.
• Local eligibility nuances may apply per country addenda.

Award Determination

Grant Cycle and Timing

• Regular annual PSU grants occur in <Month> following Board approval of the annual compensation cycle.
• Off-cycle grants require written justification and approval per the approval matrix.

Sizing Methodologies

• Market-based approach: Target long-term incentive opportunity set at <Percentile> of market per role.
• Role-based guidelines: Award ranges by grade (e.g., G12: <Amount> to <Amount> target value).
• Performance differentiation: Individual awards may vary within range based on prior-year performance.
• New hire buyouts: Replacement awards may be provided to offset forfeited value from a prior employer.

Grant Value to Unit Conversion

• Target grant value in local currency divided by the <Company Name> share price using the <Average of <Number> trading days> prior to grant.
• Example conversion: Target value <Amount> ÷ average price <Amount> = <Number> PSUs (rounded to nearest whole unit).

Performance Measures

Metric Architecture

• The PSU plan typically uses a portfolio of 2–3 metrics to balance growth, profitability, and shareholder return.
• Illustrative architecture:
  • Metric 1: Relative TSR vs. <Index/Peer Group> (weight <Percentage>).
  • Metric 2: <EPS/Revenue/Free Cash Flow> growth over the performance period (weight <Percentage>).
  • Metric 3: Strategic metric such as <Customer NPS/ESG/ROIC> (weight <Percentage>).

Goal Setting and Calibration

• Goals are established annually for each grant cycle and approved by the Compensation Committee.
• Threshold performance set at the minimum acceptable level (e.g., <Percentage> below target), typically paying at <50 percent>.
• Target represents the Board-approved plan delivering <100 percent> payout on that metric.
• Maximum performance target set at a stretch level (e.g., <Percentage> above target), typically paying at <200 percent>.
• Relative TSR typically uses percentile ranking with threshold at <25th percentile>, target at <50th percentile>, and maximum at <75th/80th percentile>.

Measurement Methodology

• Absolute metrics are measured on a cumulative or compound basis over <3> years.
• Relative TSR measured using <30/90/120>-day averaging windows at the beginning and end of the period to reduce volatility.
• Peer group composition and index methodology are frozen at grant, with rules for corporate actions per the plan appendix.
• Metrics and outcomes are subject to verification by Finance and internal audit prior to Committee certification.

Discretion and Adjustments

• The Committee may adjust results for extraordinary items to avoid windfall/shortfall outcomes, including but not limited to:
  • Significant acquisitions or divestitures
  • Changes in accounting standards
  • Restructuring charges and non-recurring items
  • Foreign exchange impacts beyond defined tolerances
• Any use of discretion will be transparently disclosed to participants and documented.

Award Mechanics

Performance Period and Vesting

• Standard performance period is <3 years> commencing on <Grant Date> and ending on <Date>.
• Vesting occurs upon Committee certification of results, typically within <60–90 days> after the performance period end.

Dividend Equivalents

• Dividend equivalents accrue on PSUs during the performance period and are paid only on vested and earned shares, settled in shares or cash per plan rules.
• No dividend equivalents are paid on forfeited PSUs.

Caps, Floors, and Negative TSR Guardrail

• Payouts are linearly interpolated between threshold, target, and maximum.
• A negative absolute TSR over the performance period caps the relative TSR component at <100 percent> payout.
• Total plan payout is capped at <200 percent> of target.

Rounding and Fractional Units

• Fractional PSUs are rounded down to the nearest whole unit unless local rules require cash settlement of fractions.

Settlement Currency and Withholding

• Default settlement is in shares of <Company Name> common stock; cash settlement may be used for certain jurisdictions.
• Tax withholding is satisfied via share withholding or net settlement at the highest required statutory rates unless the participant elects otherwise where permitted.

Payout Calculation

Formula

• Earned PSUs = Target PSUs × Sum of (Metric Weight × Metric Payout Percentage)
• Final payout subject to plan caps, negative TSR guardrail, individual eligibility, and Committee certification.

Example Calculation Table

Metric	Weight	Threshold Payout	Target Payout	Maximum Payout	Actual Result	Payout %
Relative TSR vs. <Peer Group>	<50 percent>	50% @ 25th pct	100% @ 50th pct	200% @ 75th pct	60th pct	120%
Cumulative Free Cash Flow	<30 percent>	50% @ <Amount>	100% @ <Amount>	200% @ <Amount>	<Actual Amount>	110%
ROIC Improvement	<20 percent>	50% @ <Percentage>	100% @ <Percentage>	200% @ <Percentage>	<Actual Percentage>	90%
Weighted Average Payout						115%
Target PSUs						<Number>
Earned PSUs (before caps/guardrails)						<Number × 1.15>

Certification and Settlement

• Finance prepares metric calculations and supporting documentation.
• Internal Audit validates calculation methodology and sample transactions.
• The Compensation Committee reviews and certifies results and approves the payout.
• Settlement occurs within <30–60 days> following certification, subject to trading windows and blackout rules.

Employment Events and Forfeiture Rules

New Hires and Promotions

• New hires may receive off-cycle PSU grants with prorated target values based on the remaining performance period.
• Promotions may result in incremental grants at the next regular cycle or an off-cycle adjustment with appropriate approvals.

Voluntary Resignation or Termination for Cause

• All unvested PSUs are forfeited upon termination for cause or voluntary resignation unless local law dictates otherwise.

Termination Without Cause

• Unvested PSUs typically continue to vest pro rata through the performance period, with payout based on actual results and time served, unless the award agreement specifies alternative treatment.

Retirement

• Participants who meet the retirement definition on or after the grant date generally retain eligibility for pro rata vesting and payout based on actual results at the end of the performance period.
• The plan may require a minimum service period post-grant (e.g., <12 months>) to qualify.

Death or Disability

• PSUs vest at target (or at actual performance if determinable) upon death or qualifying disability, subject to legal requirements.

Leaves of Absence

• Paid leaves continue to accrue service and dividend equivalents.
• Unpaid leaves over <Number> months may result in prorated eligibility per local policy.

Internal Transfers and International Mobility

• Transfers do not interrupt participation; tax withholding and reporting may shift to the new employing entity.
• Mobility between countries may trigger tax allocation and local securities filings; consult Global Mobility and Tax.

Corporate Transactions

Change in Control (CIC)

• CIC definition per <Equity Plan> applies.
• Double-trigger protection applies: vesting accelerates only upon both a CIC and a qualifying termination within <12–24 months>.
• In a CIC without termination, awards convert to successor awards based on exchange ratio, with performance measured through the CIC date if not assumed.

Mergers, Acquisitions, and Divestitures

• Awards for employees moving to a buyer may be treated as a qualifying termination if not assumed.
• Performance metrics may be adjusted to neutralize major acquisitions or dispositions consistent with plan adjustment principles.

Compliance and Risk Management

Legal and Regulatory Compliance

• The plan is administered under the terms of the <Company Name> Equity Incentive Plan and local country addenda.
• Compliance with securities laws in <Country/Region>, including prospectus and employee communications requirements, is mandatory.

Insider Trading and Blackout Periods

• Transactions in <Company Name> securities must comply with the Insider Trading Policy.
• PSU settlement may be deferred if a blackout is in effect; net share settlement is permitted to satisfy tax withholding.

Clawback and Malus

• PSUs are subject to the <Company Name> Clawback Policy and any applicable listing standards.
• In cases of misconduct or material restatement, the Company may cancel or recoup awards and proceeds, to the extent permitted by law.

Data Privacy and Security

• Participant data will be processed by <Vendor Name> under data processing agreements, consistent with <GDPR/CCPA/Local Law>.
• Cross-border transfers require appropriate safeguards and participant notices.

Accounting and Financial Reporting

Grant-Date Fair Value

• PSU fair value measured under <IFRS 2/ASC 718> using appropriate models:
  • Monte Carlo simulation for market conditions (e.g., Relative TSR)
  • Spot price or discounted model for non-market conditions
• Key assumptions documented and approved by Finance.

Expense Recognition

• Expense recognized over the requisite service period using graded or straight-line attribution per policy.
• For non-market metrics, expense adjusted for expected performance; true-up to actual at certification.

Modifications and Forfeitures

• Modifications trigger incremental fair value measurement on the modification date.
• Forfeitures accounted for using <estimated/actual> forfeiture approach consistent with accounting policy.

Disclosures

• Provide required disclosures in annual and interim financial statements, including weighted-average assumptions and activity tables.

Roles and Responsibilities

• Board of Directors: Approves equity plan, delegates authority, oversees total rewards strategy.
• Compensation Committee: Approves PSU design, metrics, targets, and annual grants; certifies results.
• Chief Executive Officer: Reviews executive grants and participates in design discussions; recuses from decisions on own awards.
• Total Rewards: Designs plan, coordinates annual cycle, drafts award agreements, partners with Legal and Finance.
• Finance: Models grant costs, calculates performance results, supports accounting and disclosures.
• Legal: Ensures plan compliance, updates agreements, manages securities filings and insider trading compliance.
• Payroll and Tax: Manages tax withholding and reporting, interfaces with payroll vendors by country.
• HRIS/Systems: Configures eligibility files, manages data feeds with <Vendor Name>, performs reconciliations.
• Internal Audit: Tests controls and validates calculations and settlement.
• Managers: Provide input on differentiation and confirm eligibility and employment status.
• External Vendors: Equity plan administrator, external legal counsel, valuation experts as needed.

Plan Operations and Administration

Annual Cycle Timeline

1. Design refresh and market review: <Month–Month>
2. Committee approval of metrics and goals: <Month>
3. Eligibility snapshot and grant sizing: <Month>
4. Data validation and manager review: <Month>
5. Committee approval of individual grants: <Month>
6. Grant issuance and award agreements: <Month>
7. Performance tracking and quarterly status updates: <Ongoing>
8. Certification of results and settlement: <Month>

Key Operational Controls

• Dual review of grant files and approval evidence retention.
• Automated reconciliation between HRIS and <Vendor Name> platform after grant issuance and after vesting.
• Exception log for off-cycle or non-standard awards.
• Country checklists for tax, securities law, and works council notifications.

Data Management and Feeds

• Nightly or weekly secure file transfer of eligibility and employment status from HRIS to <Vendor Name>.
• Monthly vesting and tax files from <Vendor Name> to Payroll; reconciliation evidence maintained for <Number> years.

Document Templates

• Award Agreement, Country Addenda, Grant Summary, and Plan Prospectus available on <Intranet Link>.
• All documents version-controlled and archived.

Implementation Guidelines

Design Deployment

• Conduct stakeholder workshops with <Business Units> to confirm metric relevance and controllability.
• Validate peer group composition and index alignment with Investor Relations.
• Test sample calculations and caps against historical scenarios to ensure risk balance.

System Configuration and Testing

• Configure metrics, weights, guardrails, and calculation logic in <Vendor Name>.
• Run parallel calculations for at least <2> test grants across <3> historical periods.
• Validate rounding, dividend equivalents, and country tax treatments.

Country Rollout and Change Management

• Prepare local addenda addressing tax, settlement currency, and securities filings.
• Engage works councils and comply with consultation requirements in <Country>.
• Provide training to HRBPs and managers using FAQs and quick reference guides.

Review and Approval Process

1. Total Rewards drafts the annual PSU design and recommended metrics and targets by <Date>.
2. Finance reviews cost, dilution, and accounting impacts by <Date>.
3. Legal confirms compliance with equity plan, securities laws, and country requirements by <Date>.
4. Compensation Committee reviews and approves plan design and goals by <Date>.
5. CEO and CHRO review individual award recommendations by <Date>.
6. Compensation Committee approves final grants by <Date>.
7. Awards are documented and communicated to participants by <Date>.

Risk Management and Controls

• Design risk: Overreliance on a single metric mitigated through diversified metrics and caps.
• Settlement risk: Blackout periods managed via deferred settlement or net share withholding.
• Compliance risk: Country addenda and legal review required before including new jurisdictions.
• Operational risk: Reconciliations and maker-checker controls on all files.
• Reputational risk: Clear communication of discretion and adjustments; transparent rationale recorded.

Country and Legal Considerations

Country Addenda Framework

• Each participating country will have an addendum covering:
  • Tax withholding and reporting obligations
  • Securities filing and translation requirements
  • Employment law considerations impacting forfeiture and post-termination treatment
  • Data privacy notices and consent language
  • Settlement method (share vs. cash) and currency

Works Councils and Employee Representatives

• Where applicable, works councils must be consulted prior to rollout; timelines and documentation are defined in the country plan.

Taxation and Withholding

• Taxation generally occurs upon vesting and settlement of PSUs; timing and character of income vary by jurisdiction.
• Withholding methods include share withholding, cash payroll deduction, or participant payment where permitted.
• Social taxes may apply; special rules govern mobile employees with income allocation across jurisdictions.

Documentation and Records Retention

• Maintain plan documents, approvals, grant files, and settlement records for at least <Number> years or longer as required by law.
• Store files in <System of Record> with access controls and audit logs.

Frequently Asked Technical Questions (for Total Rewards)

• How are extraordinary items handled in metric calculations
  • Apply the adjustment principles and document Committee rationale.
• Can metrics be changed mid-cycle
  • No, except as allowed under adjustment rules or in cases of significant corporate events with Committee approval.
• How are employees on international assignment treated
  • Apply tax allocation and review securities law; settlement may be in cash if required locally.
• What if the share price is suspended or unusually volatile at grant
  • Use the defined averaging window; consider additional controls if volatility exceeds <Threshold>.

Sample Award Agreement Key Terms

Section	Description
Grant Date	<Grant Date>
Target PSUs	<Number>
Performance Period	<Start Date> to <End Date>
Metrics and Weights	<Metric 1> <Percentage>, <Metric 2> <Percentage>, <Metric 3> <Percentage>
Payout Range	0% to <200%> of Target
Dividend Equivalents	Accrued and paid on earned PSUs only
Forfeiture Conditions	See Employment Events section
Clawback	Subject to <Company Name> Clawback Policy
Settlement	<Shares/Cash> at Company discretion

Glossary of Terms and Definitions

• Award Agreement: The contract issued to participants that outlines specific terms for a grant.
• Burn Rate: The number of shares granted annually divided by weighted average shares outstanding.
• Committee: The Compensation Committee of the Board of Directors.
• Dilution: Impact of equity awards on existing shareholders, including overhang and burn rate.
• Overhang: Outstanding equity awards plus shares available for future grants divided by shares outstanding.
• Peer Group: A designated set of companies used for relative performance comparison.
• Settlement: Conversion of earned PSUs into shares or cash.
• Vesting: The point at which the participant gains the right to settlement, subject to certification and policies.

Additional Legal Disclaimers

• Participation in the plan does not create a contract of employment and does not guarantee continued employment.
• The Company reserves the right to amend, suspend, or terminate the plan at any time, subject to required approvals and applicable law.
• In the event of conflict between this document and the Equity Incentive Plan or Award Agreement, the Equity Incentive Plan and Award Agreement will govern.
• Local laws may require translation or supplemental documentation; in case of discrepancies, the locally approved language may prevail as required by law.

Appendix A: Peer Group Governance (Illustrative)

• Selection criteria include industry relevance, size, and geographic footprint.
• Annual review to add or remove peers due to mergers, delistings, or strategy shifts.
• Corporate action rules:
  • Mergers: successor included if substantially similar; otherwise, peer removed without substitution.
  • Spin-offs: adjust TSR calculations to include spin-off value according to standard methodology.

Appendix B: Metric Calculation Principles (Illustrative)

• Use audited financials when available; for interim periods, rely on internal management reports with true-ups post-audit.
• FX methodology: convert using budget rates or average actual rates per policy; disclose approach consistently.
• Adjust for accounting standard changes using a “no gain/no loss” principle.

Communication to Employees and Managers

Purpose of This Section

• This section is intended for employees and managers and may be used as the basis for a participant-facing communication. It summarizes how PSUs work at <Company Name> in plain language.

What Are PSUs and Why We Use Them

• PSUs are a way for you to share in <Company Name>’s long-term success. Over a multi-year period, your PSUs can convert into shares of <Company Name> based on how we perform against goals approved by our Board’s Compensation Committee. When the Company does well against these goals, more of your PSUs are earned; if results fall short, fewer or none are earned. This connection helps align rewards with the value we create for shareholders and customers.

How Your PSU Award Is Determined

• Each year, eligible employees may receive a target number of PSUs. The size of your award depends on your role, market benchmarks, and your performance. We convert a target award value into PSUs using the average share price over a defined window around the grant date. Your grant letter shows your target PSUs and the goals for your award.

How Performance Is Measured

• Your award typically uses multiple goals so that we balance growth and returns. For example, we might measure our total shareholder return relative to a peer group, our financial results such as <EPS/Revenue/Free Cash Flow>, and a strategic metric like <ROIC/NPS/ESG>. Each goal has a weight and a range of outcomes. If we hit the target level, that portion pays out at 100 percent; stronger results can increase the payout up to a maximum, while results below threshold reduce or eliminate the payout.

When and How You Get Paid

• The performance period is usually <3 years>. After it ends, our Compensation Committee reviews the results and certifies the payout. Your earned PSUs then convert into shares of <Company Name> (or cash in some locations) after taxes are withheld. Any dividend equivalents that accrued are paid only on the shares you actually earn.

What Happens If Your Employment Changes

• If you leave <Company Name> for any reason, your PSUs may be affected. In general, resignations or terminations for cause result in forfeiture of unvested PSUs. Retirement, death, disability, or an involuntary termination without cause may allow you to keep some or all of your PSUs, typically prorated and paid based on actual results. Your award agreement has the details, and HR can help with questions.

What If the Company Merges or Is Acquired

• If there is a change in control, your award is protected. In many cases, your award will convert into a similar award of the new company. If your job is later terminated without cause within a set period after the change, vesting may accelerate under our double-trigger protection. We will communicate clearly if such an event occurs.

Taxes and Trading Rules

• When your PSUs pay out, the value is taxable. We generally withhold taxes by keeping some of the shares you earn. Also, when you hold or sell company shares, you must follow our Insider Trading Policy, which includes blackout periods when trading is not allowed.

Where to Find Your Information and Who to Ask

• You can view your grants, vesting schedules, and tax documents on the <Vendor Name> equity portal. Your award agreement and plan documents are available on the <Intranet Link>. If you have questions, contact <HR Support Email> or <Total Rewards Contact>.

Simple Example

• Suppose you receive 1,000 target PSUs. After three years, our results are certified at 115 percent of target. You would earn 1,150 PSUs. After taxes are withheld, the remaining shares are deposited into your account. If dividend equivalents apply, they are paid only on the 1,150 earned units.

Final Notes

• This overview is a summary only. Your rights and obligations are governed by your Award Agreement, the Equity Incentive Plan, and local country addenda. If anything in this summary differs from those documents, the formal plan documents control.

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Document Information:

• Document Type: Performance Share Unit Plans
• Category: Variable Compensation
• Generated: August 24, 2025
• Status: Sample Template
• Next Review: <Insert Review Date>

Usage Instructions:

1. Replace all text in angle brackets < > with your company-specific information
2. Review all sections for applicability to your organization
3. Customize content to reflect your company's policies and local regulations
4. Have legal and HR leadership review before implementation
5. Update document header with your company's version control information
6. At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.