Looking at the LTIP in isolation, coupled with the fact that that the discount rates are so significant, creates the risk that the annual bonus becomes even more important in the context of the total package. [...] To capture the benefits hoped for from deferred shares, and indicated by the academic evidence, the focus should be on time horizon rather than discount, and on more ambitious package restructuring: 3.1 Consider variants of the time horizon and discount • While a move from LTIP to deferred shares should create a discount, the academic evidence suggests that the bigger prize is to lengthen the time. [...] In these models not only would the value of the restricted shares change with the share price, the number of restricted shares would also: o With a leveraged RSU both the number of shares and the value of each share would change in line with the share price movement each year, in effect doubling the impact of share price changes both positively and negatively. [...] o In the event of an ‘against’ recommendation on a deferred share proposal, or on the implementation of a previously approved policy, the proxy adviser should offer a ‘review of learnings’ meeting after the AGM season to enable mutual understanding with the issuer. [...] This could be limited by, for example, capping the increase in number of shares that could be applied to the bank to, for example, +50%, which would produce the following pay-off comparison: 28 Leveraged indexed RSU • The same principle could be applied, but with the adjustment of number of shares in the bank being driven by the relative performance against an index rather than the absolute perfor.
- Pages
- 34
- Published in
- United Kingdom
