James Okafor· VP, Total Rewards, Halcyon Financial Group
Asked in Executive Compensation ·
German listed automotive supplier. We introduced share ownership guidelines two years ago: 200% of base salary for the chief executive and 100% for other management board members, to be built up over four years.
The CFO, who joined eighteen months ago, holds almost nothing outright but has two unvested performance share grants. He has asked whether those can count. At the moment only shares bought or fully vested are included.
What do others count, and at what value?
0 reactions · 3 replies · 5 views
Accepted answer· by Dana Whitfield
The line most companies draw is whether a performance condition is still outstanding. Performance shares do not count, since they may vest at nothing. Shares that are subject only to continued service or a holding period, such as deferred bonus shares, count on a net-of-tax basis, typically at around half their face value. For a new joiner the better lever is the mechanism for getting there. We require 25% of net annual bonus to be invested in shares until the guideline is met. Our CFO reached 100% of salary in just over three years without any change to the counting rules.
Read in the conversation ↓
Priya RaghunathanGRS, CSI
Head of People Analytics, Calibre Software
We count only shares owned outright, valued at the higher of purchase price and current price so that a falling market does not push someone out of compliance through no fault of their own. Nothing unvested counts. The build-up period exists exactly for people in your CFO's position.
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
Accepted answer
The line most companies draw is whether a performance condition is still outstanding. Performance shares do not count, since they may vest at nothing. Shares that are subject only to continued service or a holding period, such as deferred bonus shares, count on a net-of-tax basis, typically at around half their face value.
For a new joiner the better lever is the mechanism for getting there. We require 25% of net annual bonus to be invested in shares until the guideline is met. Our CFO reached 100% of salary in just over three years without any change to the counting rules.
James OkaforCRP, CEP
VP, Total Rewards, Halcyon Financial Group
Thank you. We will keep performance shares out, add deferred shares on a net basis, and propose the bonus investment requirement to the supervisory board. The CFO was content once he saw the projection.
