Kinross Gold Corporation: Accounting for Stock-based Compensation

Authors: Henderson, Darren; Liu, Christine
Source: Richard Ivey School of Business
Year: 2011
Company Name: Kinross Gold
Number of pages: 12

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Abstract:

Kinross Gold is considering changing the stock-based compensation plans that it uses for medium to long-term executive incentives. A Human Resources consultant has been retained to make recommendations. The consultant must determine whether the current split between stock options and restricted share units should be altered. In addition, she must consider whether to recommend that Kinross Gold adopt restricted performance-vesting share units. If so, appropriate performance benchmarks must be established. Finally, the consultant must quantify the impact of her recommendations on stock-based compensation expense.

This case serves to introduce students to the various factors that companies consider when choosing particular stock-based compensation instruments. With Kinross Gold, students must consider fit with corporate objectives and the impact on various stakeholders. Kinross Gold allows students to choose the various inputs when calculating fair value of stock options and to understand the impact of their choices on the calculated value. In addition, the case will allow students to use the calculated fair value of stock options to determine stock-based compensation expense and compare to the expense for restricted share units. Kinross Gold can also help students understand the various performance benchmarks that can be used for vesting conditions and the impact of such conditions on fair value and expense. Finally, the case provides an opportunity to discuss the recent push towards 'say-on-pay' votes and whether Kinross Gold should adopt such a provision.