What are Stock Appreciation Rights (SARs) and why are they being granted?

Stock Appreciation Rights (SARs) are a form of executive compensation that allows the holder to receive the value of any increase in the company's stock price over a specified period. Parker-Hannifin is granting SARs to its executive officers to incentivize them to improve the company's stock performance and align their financial interests with those of shareholders. The value received by the executive is based on the appreciation of the stock price from the grant date to the exercise date.

How will the value of these SARs be determined?

The value of each SAR is determined by the difference between the fair market value of Parker-Hannifin's common stock on the date the SAR is exercised and the exercise price. The exercise price is set at the closing price of the stock on the date the SARs were granted (August 11, 2010). If the stock price increases, the SARs will have value; if it stays the same or decreases, the SARs will not have intrinsic value.

When can the executives exercise these SARs and receive value?

The SARs vest in stages: one-third of the granted SARs become exercisable on the first anniversary of the grant date, another third on the second anniversary, and the final third on the third anniversary. Once vested, the executives can exercise them. The SARs have a ten-year term, meaning they can be exercised anytime after vesting up until the expiration date, which is ten years from the grant date.

What is the significance of the number of SARs granted to specific officers?

The number of SARs granted reflects the company's compensation committee's assessment of the executive's role, responsibilities, and expected contribution to the company's performance. A larger grant suggests a higher level of incentive and potential compensation tied to stock performance. For instance, the CEO, Donald E. Washkewicz, received the largest grant (157,680 SARs), indicating a significant incentive tied to his leadership and the company's overall success.

PH 8-K: Leadership Changes

Summary

This 8-K filing from Parker-Hannifin Corporation, filed on August 17, 2010, primarily details the authorization of Stock Appreciation Rights (SARs) granted to its executive officers on August 11, 2010. These SARs are part of the company's 2009 Omnibus Stock Incentive Plan and are designed to incentivize executive performance by aligning their compensation with the appreciation of the company's stock value. Investors should note the specifics of the SARs: they have a ten-year term, vest incrementally over three years, and their exercise price is set at the closing stock price on the grant date. The issuance of common stock upon exercise links executive compensation directly to shareholder value creation. The filing also lists the number of SARs granted to key executive officers, including the CEO, providing transparency into executive compensation structures.

Key Highlights

1Parker-Hannifin authorized Stock Appreciation Rights (SARs) for its executive officers on August 11, 2010.
2The SAR grants are made under the Corporation's 2009 Omnibus Stock Incentive Plan.
3SARs have a ten-year term, providing long-term alignment with company performance.
4Vesting of SARs occurs in one-third increments on each of the first, second, and third anniversaries of the grant date.
5The exercise price of the SARs is equal to the closing price of Parker-Hannifin's common stock on the grant date.
6Upon exercise, vested SARs entitle the holder to receive the increase in stock value, with shares of common stock issued directly.
7Key executive officers, including Donald E. Washkewicz (CEO), received significant grants of SARs.

Parker-Hannifin Corp 8-K Report, Executive Changes (Aug 17, 2010)

Summary

Key Highlights

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