Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

(a) Restricted Stock

Federated Hermes’ long-term stock-incentive compensation is provided under the Stock Incentive Plan (the Plan), as amended and subsequently approved by shareholders from time to time. Share-based awards are granted to reward Federated Hermes’ employees and non-management directors who have contributed to the success of Federated Hermes and to provide incentive to increase their efforts on behalf of Federated Hermes. Since the Plan’s inception, a total of 36.1 million shares of Class B common stock have been authorized for granting share-based awards in the form of restricted stock, stock options or other share-based awards. As of December 31, 2023, 3.8 million shares are available under the Plan.

Share-based compensation expense was $33.9 million, $34.8 million and $30.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. The associated tax benefits recorded in connection with share-based compensation expense were $8.3 million, $8.2 million and $7.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. At December 31, 2023, the maximum remaining unrecognized compensation expense related to share-based awards approximated $87.8 million which is expected to be recognized over a weighted-average period of approximately six years.

Federated Hermes’ restricted stock awards represent shares of Federated Hermes Class B common stock that may be sold by the awardee only once restrictions lapse, as dictated by the terms of the award. The awards are generally subject to graded vesting schedules that vary in length from three to ten years with a portion of the award vesting each year, as dictated by the terms of the award. For an award with a ten-year vesting period, the restrictions on the vested portion of the award typically lapse on the award’s fifth- and tenth-year anniversaries. For an award with a five-year vesting period, the restrictions on the vested portion of the award typically lapse on the award’s six-, seventh- and eighth-year anniversaries. Certain restricted stock awards granted pursuant to a key employee bonus program have a three-year graded vesting schedule with restrictions lapsing at each vesting date. During these restriction periods, the recipient receives dividends on all shares awarded, regardless of their vesting status.

The following table summarizes activity of non-vested restricted stock awards for the year ended December 31, 2023:


	Restricted Shares	Weighted- Average Grant- Date Fair Value
Non-vested at January 1, 2023	4,536,758		$	29.54
Granted1	876,296		34.20
Vested	(1,398,118)		29.49
Forfeited	(128,442)		29.66
Non-vested at December 31, 2023	3,886,494		$	30.60

1 During 2023, Federated Hermes awarded 86,000 shares of restricted Class B common stock under the UK Sub-Plan that generally vest over a five-year period. Federated Hermes awarded 375,796 shares of restricted Class B common stock in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under the Plan. This bonus restricted stock, which was granted on the bonus payment date and issued out of treasury, generally vests over a three-year period. In addition, Federated Hermes awarded 414,500 shares of restricted Class B common stock under this same Plan that generally vest over a ten-year period.

Federated Hermes awarded 876,296 shares of restricted Class B common stock with a weighted-average grant-date fair value of $34.20 to employees during 2023; awarded 2,314,542 shares of restricted Class B common stock with a weighted-average grant-date fair value of $32.89 to employees during 2022; and awarded 1,218,613 shares of restricted Class B common stock with a weighted-average grant-date fair value of $30.07 to employees during 2021.

The total fair value of restricted stock vested during 2023, 2022 and 2021 was $49.5 million, $52.0 million and $35.0 million, respectively.

(b) Subsidiary Stock Plan

Effective July 2, 2018, Federated Hermes established a non-public subsidiary share-based compensation plan for certain employees of FHL. These awards, which were subject to continued-service vesting requirements, vested over a period of three to five years. The award holders had a right to exercise a put option to sell shares to Federated Hermes at fair value and Federated Hermes had a right to exercise a call option to acquire shares at fair value. Federated Hermes recognized compensation expense for this plan of $0.7 million and $9.4 million in Operating Expenses - Compensation and Related on the Consolidated Statements of Income for the years ended December 31, 2022 and 2021, respectively. No compensation expense for this plan was recognized for the year ended December 31, 2023.

On March 14, 2022, Federated Hermes acquired the remaining shares of FHL. Federated Hermes granted 1,183,066 shares of restricted Federated Hermes Class B common stock pursuant to award agreements to certain FHL employees in exchange for their beneficial interests in awards of restricted FHL shares held on March 14, 2022. These shares of Federated Hermes Class B common stock were reserved for issuance under the Plan. Federated Hermes also issued a combined 318,807 shares of treasury Federated Hermes Class B common stock to the trustee of a non-U.S. domiciled employee benefit trust, and a non-U.S. resident former FHL employee, in exchange for beneficial interests in the FHL shares held by them on March 14, 2022. The Federated Hermes shares now held by the employee benefit trust are to be used for future restricted stock awards for FHL management and key employees. As of December 31, 2023, 79,874 shares remain available in the employee benefit trust.