Performance shares are awards of shares of stock or stock units granted contingent upon achievement of previously defined performance objectives over a multi-year period (typically three years). The performance conditions placed on these awards are typically based on either operational performance (using metrics such as earnings per share or return on assets) or market performance (total shareholder return on an absolute basis or relative to peers). Grants may be made every year on an overlapping basis or every three years on an end-to-end basis. Unlike cash-based awards, the value of a performance share award fluctuates based on the performance compared to the incentive targets (which determine the number of shares that will be earned at the end of the performance period) and on changes in stock price. Once earned, share-based awards may still include a period of time-based vesting before the stock is owned by the recipient. Performance-based incentives are popular with investors and proxy advisors because they create a direct link between pay and performance, as well as alignment with investors. Although many investors consider total shareholder return to be the ultimate definition of company performance, the Center believes that companies should choose performance metrics that are best linked to company strategy and objectives, while correlating to improved stock performance over the long term rather than short term.