Relative Total Shareholder Return (rTSR)

Relative TSR is a metric that measures a company's stock price performance, plus dividends, against a peer group or index over the performance period.

Overview

What is it:

Relative TSR is a frequently-used performance metric in PSU formula design that measures a company's stock price performance, plus dividends, against a peer group or index over the performance period, rather than against an absolute internal target.

To understand rTSR, start with the baseline calculation for standard TSR, which is then ranked against competitors:

TSR = [(Ending Stock Price − Beginning Stock Price) + Cumulative Dividends] ÷ Beginning Stock Price

The "r" in rTSR comes in when your company's final TSR is placed in descending order alongside its peer group to find its percentile rank (for example, 75th percentile means the company outperformed 75% of its peers).

Why does it matter:

Your payout depends on how your stock performed relative to that peer group, not on whether the stock price moved up or down in absolute terms. Understanding this metric changes how you read your own equity outcome even when the broader market is moving in your favor.

What do people most often get wrong:

People often conflate TSR with rTSR. They assume a rising stock price guarantees a strong PSU payout. Under an rTSR metric, your company's stock can rise significantly and still produce a below-target payout if peer stocks rose even more. The reverse is also true: a falling stock price can still produce an above-target payout if your stock fell less than peer stocks.