Burn Rate

Burn rate measures how many shares a company grants under its equity incentive plan in a given year, expressed as a percentage of its shares outstanding. It is a dilution metric rather than a pay metric: it says nothing about what an individual executive earned, only how quickly the company’s existing owners are being diluted by new equity awards.

The number depends on two choices that companies make differently, which is why two companies with similar grant practices can report very different rates. The numerator is the shares subject to awards granted during the year, and the denominator is generally shares outstanding, often a weighted average for the period rather than a year-end count.

Most reported rates are either gross or net. A gross burn rate counts every share granted during the year without adjustment. A net burn rate reduces the grant figure by shares that come back to the plan through forfeitures, cancelations, or shares withheld from vesting awards to cover taxes and exercise costs, and it therefore tracks how fast the plan’s available share reserve is actually being consumed.

The denominator also determines what a rate is measuring. Expressed against shares outstanding, it describes dilution of existing holders. Expressed against the shares still available under the plan, it describes how long the remaining reserve will last at the current pace of granting, which is usually the question a board is trying to answer when it decides to ask shareholders for more shares.

A single year can mislead in either direction. A large new-hire award, a retention grant made during a contested acquisition, or a scheduled refresh of a founder’s equity can lift one year well above the company’s normal pace, while a year with no annual grant cycle can push it unusually low. That is why the figure is normally presented as a trailing multi-year average alongside the single-year rate.

Burn rate is read most often in the context of a request to add shares to the plan. Under the exchange listing rules at the NYSE and Nasdaq, equity compensation plans and material amendments to them generally require shareholder approval, so a company that has been granting faster than its reserve can support must come to shareholders for authorization, and the burn rate is one of the figures presented to support that request.

Proxy advisers publish their own benchmarks for the rate, set by index membership and industry, and a rate meaningfully above the applicable benchmark is one of the more common reasons an equity plan proposal draws an "against" recommendation. The benchmark is not a universal threshold — a rate that is unremarkable for one industry and index can be high for another, so the comparison only means something when made against the right set.

Burn rate is distinct from overhang, which is a stock measure rather than a flow: overhang describes the total potential dilution already outstanding, meaning awards still unvested plus shares still available for future grant, expressed against shares outstanding. A company can carry a large overhang from past grants while running a low current burn rate, or the reverse, and the two questions — how much dilution exists and how fast it is growing — need to be asked separately.

Accenture's own disclosure puts its one-year equity plan burn rate for fiscal 2025 at 1.40% of shares outstanding.