Equity-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

14. Equity-Based Compensation

In May 2012, Carlyle Group Management L.L.C., the general partner of the Partnership, adopted the Equity Incentive Plan. The Equity Incentive Plan, which was amended on January 1, 2020 in connection with the Conversion to reflect shares of the Company’s common stock, is a source of equity-based awards permitting the Company to grant to Carlyle employees, directors and consultants non-qualified options, share appreciation rights, common shares, restricted stock units and other awards based on the Company’s common shares. The total number of the Company’s common shares which were initially available for grant under the Equity Incentive Plan was 30,450,000. Prior to June 1, 2021, the Equity Incentive Plan contained a provision which automatically increased the number of the Company’s common shares available for grant based on a pre-determined formula; this increase occurs annually on January 1. As of January 1, 2021, pursuant to the formula, the total number of the Company’s common shares available for grant under the Equity Incentive Plan was 35,352,057. On June 1, 2021, the shareholders of the Company approved an amended and restated Equity Incentive Plan that removed the provision providing for the automatic increase and reset the total number of shares of common stock available for grant to 16,000,000 for awards granted under the plan after June 1, 2021. As of December 31, 2021, the total number of the Company’s common shares available for grant under the amended and restated Equity Incentive Plan was 15,636,767. This amount does not include restricted stock units granted in February 2022 or the issuance of common shares in January and February 2022 related to the carry distributed in shares program (see Note 13).

Common Shares

In connection with its strategic investment in NGP, the Company agreed to grant common shares on each of February 1, 2019 and 2020 with a value of $10.0 million per year to an affiliate of NGP Management, and subsequent to 2020, to grant common shares on an annual basis with a value not to exceed based $10.0 million based on a prescribed formula, which will vest over a 42-month period. Because the Company accounts for its investment in NGP under the equity method of accounting, the fair value of the shares is recognized as a reduction to principal investment income. During the years ended December 31, 2021, 2020 and 2019, the Company recognized $9.2 million, $8.8 million and $8.1 million, respectively, as a reduction to principal investment income related to these shares.

Carlyle Holdings Partnership Units

Unvested Carlyle Holdings partnership units were held by senior Carlyle professionals and other individuals engaged in Carlyle’s business and generally vested ratably over a six-year period. The unvested Carlyle Holdings partnership units were accounted for as equity-based compensation in accordance with ASC 718. The grant-date fair value of the unvested Carlyle Holdings partnership units were charged to equity-based compensation expense on a straight-line basis over the required service period. The Company recorded equity-based compensation expense associated with these awards of $0.2 million for the year ended December 31, 2019. No tax benefits were recorded related to the unvested Carlyle Holdings partnership units, as the vesting of these units did not result in a tax deduction to the corporate taxpayers. As of December 31, 2019, all of these awards were vested.

Restricted Stock Units

The deferred restricted stock units are unvested when granted and vest ratably over a service period, which generally ranges from six months to four years. The grant-date fair value of the deferred restricted stock units granted to Carlyle’s employees is charged to equity-based compensation expense on a straight-line basis over the required service period. Additionally, the calculation of the expense assumes a per unit discount that ranges from 0% to 20.0%, as these unvested awards do not participate in any dividends. Equity-based compensation expense generates deferred tax assets, which are realized when the units vest. The Company recorded compensation expense of $163.1 million, $105.0 million and $139.8 million for the years ended December 31, 2021, 2020 and 2019, respectively, with $33.4 million, $26.0 million and $13.7 million of corresponding deferred tax benefits, respectively. A portion of the accumulated deferred tax asset associated with equity-based compensation expense was reclassified as a current tax benefit due to units vesting during the years ended December 31, 2021, 2020 and 2019. The net impact of the addition/(reduction) in deferred tax assets due to the equity-based compensation expense recorded during the period less the tax deduction for units that vested was $10.0 million, $(4.8) million and $(4.7) million for the years ended December 31, 2021, 2020 and 2019, respectively. In addition, the deferred tax asset related to equity-based compensation increased by $15.5 million during the year ended December 31, 2020 as a result of the exchange of Carlyle Holdings units in the Conversion, as equity-based compensation previously attributable to non-controlling interests is now attributable to the Company (see Note 10). As of December 31, 2021, the total unrecognized equity-based compensation expense related to unvested deferred restricted stock units is $293.8 million, which is expected to be recognized over a weighted-average term of 2.3 years.

The expense associated with the deferred restricted stock units granted to NGP personnel are recognized as a reduction of the Company’s investment income in NGP Management. Equity-based awards issued to non-employees, including non-employee directors and consultants, are recognized as general, administrative and other expenses. The grant-date fair value of deferred restricted stock units granted to non-employees is charged to expense on a straight-line basis over the vesting period. Equity-based awards that require the satisfaction of future service criteria are recognized over the relevant service period. The expense for equity-based awards issued to non-employees was $5.2 million, $6.0 million and $6.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The vesting of deferred restricted stock units creates taxable income for the Company’s employees in certain jurisdictions. Accordingly, the employees may elect to engage the Company’s equity plan service provider to sell sufficient common shares and generate proceeds to cover their minimum tax obligations.

During 2021, the Company granted 7.1 million long-term, strategic restricted stock units to certain senior professionals, the majority of which are subject to vesting based on the achievement of annual performance targets over four years across a number of the Company’s employees. Compensation cost will be recognized over the requisite service period if it is probable that the performance condition will be satisfied.

A summary of the status of the Company’s non-vested equity-based awards as of December 31, 2021 and a summary of changes from December 31, 2018 through December 31, 2021, are presented below:


	Carlyle Holdings			The Carlyle Group, Inc.
				Equity Settled Awards
Unvested Shares	Partnership Units	Weighted- Average Grant Date Fair Value		Restricted Stock Units	Weighted- Average Grant Date Fair Value		Unvested Common Shares (1)	Weighted- Average Grant Date Fair Value
Balance, December 31, 2018	9,387	$	28.26	19,123,700	$	18.73	400,528	$	24.97
Granted	—	$	—	6,196,319	$	15.73	547,973	$	18.25
Vested	9,387	$	28.26	9,903,260	$	19.35	160,211	$	24.97
Forfeited	—	$	—	794,600	$	17.82	—	$	—
Balance, December 31, 2019	—	$	—	14,622,159	$	17.09	788,290	$	20.30
Granted	—	$	—	3,450,355	$	29.40	299,401	$	33.40
Vested	—	$	—	7,112,767	$	17.36	339,347	$	20.63
Forfeited	—	$	—	2,436,665	$	19.03	—	$	—
Balance, December 31, 2020	—	$	—	8,523,082	$	21.70	748,344	$	25.39
Granted (2)	—	$	—	11,207,062	$	31.64	291,396	$	32.93
Vested	—	$	—	4,625,457	$	22.64	404,310	$	24.73
Forfeited	—	$	—	329,036	$	31.02	—	$	—
Balance, December 31, 2021	—	$	—	14,775,651	$	30.70	635,430	$	29.27

(1) Includes shares issued in connection with the Company’s strategic investment in NGP.

(2) Includes 7.1 million long-term, strategic restricted stock units to certain senior professionals, the majority of which are subject to vesting based on the achievement of annual performance targets over four years across a number of the Company’s employees.