Stock-based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

The Company’s 2012 Heidrick & Struggles GlobalShare Program (the “2012 Program”) provides for grants of stock options, stock appreciation rights, and other stock-based awards that are valued based upon the grant date fair value of shares. These awards may be granted to directors, selected employees and independent contractors. The 2012 Program originally authorized 1,300,000 shares of Common Stock for issuance pursuant to awards under the plan.

On May 22, 2014, the stockholders of the Company approved an amendment to the 2012 Program to increase the number of shares of Common Stock reserved for issuance under the 2012 Program by 700,000 shares. As of March 31, 2016, 1,335,870 awards have been issued under the 2012 Program and 1,047,790 shares remain available for future awards, which includes 383,660 forfeited awards. The 2012 Program provides that no awards can be granted after May 24, 2022.

The Company measures its stock-based compensation costs based on the grant date fair value of the awards and recognizes these costs in the financial statements over the requisite service period.

A summary of information with respect to stock-based compensation is as follows:



	Three Months Ended March 31,
	2016		2015
Salaries and employee benefits	$	1,831	$	1,033
Income tax benefit related to stock-based compensation included in net income	737		416

Restricted Stock Units

Restricted stock unit activity for the three months ended March 31, 2016:



	Number of Restricted Stock Units		Weighted- Average Grant-date Fair Value
Outstanding on December 31, 2015	473,935		$	19.98
Granted	176,635		23.73
Vested and converted to common stock	(117,845	)	20.01
Forfeited	(7,634	)	22.19
Outstanding on March 31, 2016	525,091		21.20

As of March 31, 2016, there was $6.7 million of pre-tax unrecognized compensation expense related to unvested restricted stock units, which is expected to be recognized over a weighted average of 2.5 years.

Performance Stock Units

The Company grants performance stock units to certain of its senior executives. The performance stock units are generally subject to a cliff vesting at the end of a three year period. The vesting will vary between 0%—200% based on the attainment of operating income goals over the three year vesting period. The performance stock units are expensed on a straight-line basis over the three year vesting period.

In 2014, the Company granted market-based performance stock units to the Chief Executive Officer. The market-based awards vest after a two year service period and if the price of the Company’s common stock exceeds specified targets. The fair value of the market-based awards was determined using the Monte-Carlo simulation model. A Monte Carlo simulation model uses stock price volatility and other variables to estimate the probability of satisfying the market conditions and the resulting fair value of the award. Compensation costs related to the market-based awards are recognized regardless of whether the market condition is satisfied, as long as the requisite service has been provided. All of the market-based performance conditions were satisfied such that all 125,000 performance stock units granted to the Chief Executive Officer vested upon the completion of the two year service period in February 2016.

Performance stock unit activity for the three months ended March 31, 2016:



	Number of Restricted Stock Units		Weighted- Average Grant-date Fair Value
Outstanding on December 31, 2015	272,024		$	18.28
Granted	125,388		22.98
Vested and converted to common stock	(160,600	)	15.51
Forfeited	—		—
Outstanding on March 31, 2016	236,812		22.64

As of March 31, 2016, there was $4.1 million of pre-tax unrecognized compensation expense related to unvested performance stock units, which is expected to be recognized over a weighted average of 2.5 years.