Compensation and Benefits

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Note 10. Compensation and Benefits

Total compensation and benefits consists of the following:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019		2018		2019		2018
Salaries, incentive compensation and benefits ⁽¹⁾	$	89,969	$	90,097	$	267,198	$	273,057
Restricted share-based award compensation expense	9,878		12,644		33,417		41,652


Total compensation and benefits	$	99,847	$	102,741	$	300,615	$	314,709

⁽¹⁾ Excluding restricted share-based award compensation expense

Incentive compensation

Cash incentive compensation paid to members of Artisan’s investment teams and members of its distribution teams is generally based on formulas that are tied directly to revenues. These payments are made in the quarter following the quarter in which the incentive was earned with the exception of fourth quarter payments which are paid in the fourth quarter of the year. Cash incentive compensation paid to most other employees is discretionary and subjectively determined based on individual performance and Artisan’s overall results during the applicable year and is generally paid on an annual basis.

Restricted share-based awards

Artisan has registered 14,000,000 shares of Class A common stock for issuance under the 2013 Omnibus Incentive Compensation Plan (the “Plan”). Pursuant to the Plan, APAM has granted a combination of restricted stock awards and restricted stock units (collectively referred to as “restricted share-based awards”) of Class A common stock to employees. Restricted share-based awards have a pro-rata five year vesting requirement. Certain restricted share-based awards will vest or become eligible to vest only upon a combination of both (1) pro-rata annual time vesting and (2) a qualifying retirement (as defined in the award agreements).

A portion of the restricted share-based awards granted to portfolio managers contain a Franchise Protection Clause, which provides that the number of awards that ultimately vest depends on achieving performance goals related to client cash flows. If such goals are not met, compensation cost will be reversed for any awards that do not vest. The fair value, requisite service period and expense recognition for these awards are determined in the same manner as the other restricted share-based awards.

Unvested awards are subject to forfeiture. Grantees receiving the awards are entitled to dividends on unvested and vested shares and units. 5,600,864 shares of Class A common stock were reserved and available for issuance under the Plan as of September 30, 2019.

During the nine months ended September 30, 2019, Artisan granted 959,000 restricted stock awards and 4,000 restricted stock units of Class A common stock to employees of the Company. Total compensation expense associated with the 2019 grant is expected to be approximately $22.1 million. Compensation expense related to the restricted share-based awards is recognized based on the estimated grant date fair value on a straight-line basis over the requisite service period of the award. The initial requisite service period is generally five years for restricted share-based awards.

The Company’s accounting policy is to record the impact of forfeitures when they occur. The following table summarizes the restricted share-based award activity for the nine months ended September 30, 2019:


	Weighted-Average Grant Date Fair Value		Number of Awards
Unvested at January 1, 2019	$	38.04	4,678,457
Granted	22.92		963,000
Forfeited	34.86		(16,865)
Vested	39.21		(617,943)
Unvested at September 30, 2019	$	35.00	5,006,649

The unrecognized compensation expense for the unvested awards as of September 30, 2019 was $90.7 million with a weighted average recognition period of 3.3 years remaining.

During the nine months ended September 30, 2019, the Company withheld a total of 82,729 restricted shares as a result of net share settlements to satisfy employee tax withholding obligations. The Company paid $2.1 million in employee tax withholding obligations related to these settlements during the nine months ended September 30, 2019. These net share settlements had the effect of shares repurchased and retired by the Company, as they reduced the number of shares outstanding.