Trends in Employee Incentives: Loan Funded Share Plans (LFSPs)

Source: Hall Wilcox  In recent years, the use of options as an incentive for employees has fallen out of favor.  While the reasons are varied, a significant driver of this trend has been the change in the tax laws for employee share schemes (the ESS Rules) that were made in 2009. The changes mean that, in many cases, employees become subject to tax on vesting of the options.  Given the fall in some companies' share values over the last few years, this meant that there could be a tax liability even though the options were 'underwater' (the exercise price was more than the value of the underlying share).  Moreover, the taxing point at vesting doesn't always coincide with the time when cash comes into the hands of the employee, so many employees need to exercise some of their options and sell the resulting shares to pay the tax liability on vesting.

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C-suite Addiction to Stock Options No Bonus for Shareholders

Source: Globe & Mail  The shareholder revolt continues. This time, Lululemon Athletica Inc. is being sued by a pension plan investor over an executive compensation issue. The Vancouver-based fashion company recently had to pull its black yoga pants off store shelves because they were unintentionally see-through. The recall represented about 17 per cent of all women's pants Lululemon sold in its stores and a bottom line loss to the company of roughly $40-million.

Rising 'Share' of Employee Rewards

Source: Business Line  Share-based payments are a well-established mechanism for rewarding and retaining employees. With the advent of the information technology sector in India in the 1990s, almost all the major companies such as Wipro and Infosys began issuing Employee Stock Option Plans (ESOPs).  An ESOP grants an employee the right (but not the obligation) to purchase a stipulated quantity of the company's shares at a stated price for a set period of time. Initially the grants contained service conditions such as a minimum period of continued employment before the options were vested. Later, as the markets evolved, performance-based conditions such as achieving specified year-on-year revenue growth were frequently introduced.

Sinha Concealed UTI ESOP'S from Sebi: Bhushan to SC

Source: Business Standard  Fresh charges were made today in the Supreme Court hearing in the public interest suit challenging the appointment (in February 2011) of U K Sinha as chairman of the Securities and Exchange Board of India (Sebi).  Senior advocate Prashant Bhushan told the court that Sinha had concealed the employee stock option plans (Esops) he had received in a draft prospectus filed with Sebi while being chairman of UTI Asset Management.

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A New Way to Reward and Retain Employees Can be Better Explained

Source: Biz The Star  How far should a listed company go to engage with shareholders and other investors to articulate something that's difficult to appreciate? NYSE-traded Loews Corp have thought outside the box and have opted to try to get its message across through a comicbook.

Petropavlovsk Slashes Top Executive Pay After Share Plunge

Source: Reuters  Russian miner Petropavlovsk has scrapped bonuses and incentive payments for its executives and chairman, after its shares tumbled last month by as much as a quarter on a single day, hit by a steep gold price drop.  Petropavlovsk has been among the worst performers in the precious metals sector in the first quarter, with its shares falling almost 40 percent - even before gold fell to a two-year low in April, dropping to below $1,400 per ounce.

UBS Holders Back Pay Plan 

July 6 Deadline Approaching for UK Equity Award Tax Report

Accrual Management and the Decision to Hold the Shares Acquired from the Exercise of Executive Stock Options

Source: SSRN  This study extends the employee stock option literature by examining the impact of accrual management both prior to and following stock option exercise to examine its effect on the decision to hold shares from option exercise. We find evidence that accrual management prior to exercise is negatively associated with the decision to hold shares for at least 30 days, while accrual management following exercise is positively associated with the decision to hold shares for at least a year.