Performance Stock Unit (PSU)

A performance stock unit is a form of restricted stock unit whose ultimate payout depends on the company achieving pre-set performance goals over a multi-year period. The goals are set in advance by the compensation committee and disclosed in the proxy; common metrics include relative total shareholder return, revenue growth, and an operating-margin target. A performance period of about three years is the most common design, which is what makes a PSU the long-term, outcome-contingent half of a typical executive pay package.

A PSU grant is disclosed with a range rather than a single number. The threshold is the minimum earned if performance clears the lowest bar, the target is earned at expected performance, and the maximum is earned if performance exceeds the top of the range, usually set as a multiple of target. A result between the bars is interpolated, so the number of units that ultimately vest is not fixed on the grant date at all.

The grant-date fair value reported in the Summary Compensation Table is typically calculated at target, or using a model that accounts for the probability of the performance condition being met. Awards tied to relative total shareholder return are commonly valued with a Monte Carlo simulation, because the outcome depends on how the stock performs against a comparison group rather than on the stock price alone. That modeling is the main reason PSU grant values are less directly comparable across companies than time-based restricted stock unit values are.

Relative total shareholder return is the metric most closely associated with PSUs, and its design matters to the outcome. The payout depends on how the company’s return compares with a peer group or an index over the performance period, not on the absolute level of the stock. That means a company can deliver a strong absolute return and still pay below target if its peers did better, or a weak absolute return and still pay above target if its peers did worse.

At the end of the performance period, the compensation committee certifies the results against the goals and determines the number of units actually earned. The award then settles in shares, with a common practice of withholding a portion of the shares for tax. If performance falls below the threshold, the earned payout can be zero, which is the defining difference between a PSU and a time-based award that vests on service alone.

The disclosure of a PSU appears in several places at once. The Summary Compensation Table reports the grant-date fair value of the award made during the year. The Grants of Plan-Based Awards table sets out the threshold, target, and maximum payout levels. The Outstanding Equity Awards at Fiscal Year-End table shows the unvested units still held, often stated at the maximum level, which means a figure there is a potential rather than an earned amount.

The gap between a PSU’s target grant value and its realized value is where the award’s whole design shows up. A grant valued at target that goes on to pay at maximum delivers more than the Summary Compensation Table ever showed, and one that misses threshold delivers less than the table implied. This is the same grant-date-versus-realized distinction that separates the Summary Compensation Table from Compensation Actually Paid, concentrated into a single award whose payout genuinely was uncertain.

Marvell granted Sandeep Bharathi a performance stock unit award on July 15, 2025 with a target payout of 168,839 shares, rising to a maximum of 422,098 shares if the plan's performance conditions are exceeded.