Reading about stock appreciation rights and it says that compensation may come in the form of cash and/or equity. It continues to say that a benefit of stock appreciation rights is that no additional shares are issued, avoiding diluting the interests of existing equity holders. How could equity be granted without issuing shares/diluting interests of existing equity holders?
Treasury shares. If a company has lots of Treasury stock, they are alwasy abusing their shareholders by awarding themselves the company. Edit: So I think the point made in the book is largely BS. If the company goes out and spends lots of cash to buy treasury stock which it then awards to it’s executives through share appreciation rights, should the CFA charterholder think that’s better than dilution?
I think they mean that doing so does not result in an immediate dilution nor an increase in outstanding shares. I haven’t read that section, so take it with a grain of salt. It’s like stock options. Of course you should still calculate diluted EPS and all, but that’s not the same as actual dilution.