Long-term incentive awards are typically granted annually or upon hire, but the
Compensation Committee may award equity at other times during the year to further reward or to encourage retention of our executive officers, including our NEOs. For both new hire and periodic equity grants, management develops grant
recommendations for the Compensation Committee by subjectively evaluating the factors above, as applicable, to set a total compensation target for each executive officer and then designing equity awards to help meet those total compensation
targets based on stock price appreciation assumptions, taking into account the executive officer’s cash compensation and the estimated value of pre-existing stock-based compensation vesting in subsequent years, if any. In this process, management
views projected total compensation for a given year as cash compensation expected to be earned in that year plus an assumed value of stock-based compensation vesting in that year. Because we focus on total compensation over time and take into
account existing compensation, equity awards for a smaller number of shares do not necessarily reflect lower total compensation and equity awards for a larger number of shares do not necessarily reflect higher total compensation. For fiscal 2022,
the total compensation target for each of the NEOs, other than Mr. Oringer, was: Mr, Pavlovsky – $6,900,000, Paul Hennessy – $11,400,000, Jarrod Yahes – $3,990,000 and Mr. Silvio – $2,140,000.
Stock Options
Except for the stock options granted to Mr. Oringer in 2014, which are more fully described
above under “Executive Compensation Philosophy & Objectives - Executive Chairman Compensation,” stock options are granted under the Shutterstock, Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Plan”) at an exercise price equal to the
closing price of our Common Stock on the grant date. The number of options granted to an executive is determined based upon the Black-Scholes valuation on the grant date. We do not issue stock options with accelerated vesting features, except as
specified in certain employment agreements.
Although we are required to recognize a charge for the value of an option when granted that
might be disproportionate to the value received by the recipient upon exercise, we believe the granting of options is performance-based and aligns the interests of recipients with those of stockholders because the recipient only realizes value if
our Common Stock appreciates above the grant date price.
Restricted Stock Units
Under the 2022 Plan, and for certain grants made in 2022 and in prior years under the
Shutterstock, Inc. 2012 Omnibus Equity Incentive Plan (the “2012 Plan”), we grant RSUs, which are the right to receive shares of our Common Stock, that are subject to continued employment through the applicable vesting date. The number of RSUs
granted to an executive is determined by dividing the fair market value of the RSU grant by the average of the Company’s closing price for a share of Common Stock on each trading day during the 30 trading days period ending on the date
immediately prior to the grant date. RSUs are granted to executive officers, including our NEOs, to serve primarily as a retention mechanism and to award individual performance.
Stock option or RSU grants to our executive officers, including our NEOs, are currently
structured to vest in equal installments over three years to balance the objective of retaining and incentivizing our executive officers, achieving key short-term deliverables with respect to our financial performance, and the long-term stability
of the organization.
On July 1, 2022, pursuant to the terms of his employment agreement, we granted Mr. Hennessy
262,789 RSUs ($15 million grant date value) which vest annually in approximately three equal increments on the first, second and third anniversary of the grant date, provided Mr. Hennessy’s employment continues through the applicable vesting
date. In addition, during 2022 we granted Mr. Pavlovsky 15,086 RSUs, Mr. Silvio 4,114 RSUs and Mr. Yahes 8,229 RSUs, which vest in approximately equal increments on the first, second and third anniversaries of the grant date subject to continued
employment through the applicable vesting date.
Performance Stock Units
For fiscal 2022, the Compensation Committee determined it was in the best interest of the
Company, as part of the overall long-term incentive compensation program, to grant our executive officers PSUs designed to focus our executive officers on achieving important long-term financial objectives over a three-year period. A portion of
the PSUs are eligible to vest annually, contingent on continued service and the achievement of the specified performance goals in the specific years. The annual targets for each of the PSU grants are set by the Compensation Committee over a
three-year period based on the Company’s strategic objectives and goals. The Compensation Committee seeks to make target goals ambitious, requiring meaningful growth over the performance period, while
