The lead up to the end of the financial year is the peak period for most organisations yearly budgeting and business planning. Given this, it is an opportune time for companies to review key management remuneration including equity components.
In particular, companies should, as part of their annual budgeting and business planning, ensure that current equity incentive arrangements continue to be appropriate to reflect any updated focus of the organisation and having regard to revised budgets and KPIs for the coming financial year.
To ensure existing equity incentive arrangements remain relevant and reflective of the organisation’s goals, companies should:
- review short term KPI performance goals for the following financial year
- determinate or update vesting conditions for long term incentive arrangements to reflect the organisation’s long-term goals, and
- if required, undertake a general review of equity incentive plans to ensure they are up to date and appropriate.
A general review of equity incentive arrangements should take into account the changes to the taxation of employee share schemes which began on 1 July last year. The lead up to the end of financial year is a good time for companies to consider whether they are eligible to take advantage of the new ‘start up’ concessions or to modify plans to take advantage of the deferral or other concessions under the new tax regime.
Listed companies should also take into account the need for stakeholder engagement and consider the role proxy advisers may have in connection with the ‘remuneration report’ vote at their AGM.