Module 5 - Exec Share Plans Flashcards
Which Co need to obtain shareholder approval
all premium listed companies with (1) LTIP plan with executives (2) Newly issued shares or Treasury shares
What is the LTIP
1- have SERVICE or performance conditions and more than 1 year measurement period, 2 - increase cost and liability, 3 - not a deferred bonus plan
What are the types of performance conditions
Type A: 1- absolute (share price, TSR) and 2- comparative (as compared with the peers) Type B: 1 Financial or 2- non-financial Type C: personal to the participant
Performance conditions - what are they?
Target (use different word to conditions) that have to be satisfied before awards vests. Normally applied to LTIPs, sometimes to SIP. Desired by shareholders and required by IA and Corporate Governance Code. Designed to incentivize employees.
TSR - how is it calculated?
Share price (End) - Share price (Start) + Dividend. 12$ -10$+0$=2$ or 10$-10$+0$=0$
Good leaver rule - what are reasons?
Death, disability-injury-illness, retirement (sometimes), sale of subsidiary/business or redundancy
What triggers malus or clawback?
Misstatement of company accounts, gross misconduct or the employee or group of employees, serious financial problems
Difficulties with applying malus and clawback
1- employee may site breach of “mutual trust and confidence, 2- terms must be accepted, 3-legally unlawful deduction of wages can prevent from auctioning CONCENT is needed, 4 - clawback should be proportionate
Change of control - what is it?
Parent’s company shares are acquired on takeover or as part of scheme of arrangement. “Bidder” wants 100% ownership.
what are tax benefits of Enterprise Management Incentive Options
1- option gain is free of income tax and NIC, 2- tax on ly is option price is below share price 3-£250,000 employee limit and £3 million company limit
