Incentives round up - Autumn 2009

Updated October 2009

A summary of the latest news on incentives.

DSG win approval from shareholders for innovative new scheme (Financial Times) - At its AGM in September, 87% of shareholders voted in favour of removing performance conditions for options granted in the financial year 2009/10 under a Reward Sacrifice Scheme. The catch for executives is that they will have ".. to sacrifice up to 25% of their cash remuneration in return for the grant of options with a value of £3 at the date of grant, for every £1 of pay given up." Although Pirc and the ABI voiced their concern at the proposal, the Company won the support of its two biggest shareholders.

Cash savings of switching to a PSP/LTIP (TLT LLP) - A survey of the top 100 AIM companies, conducted by Hewitt New Bridge Street back in the Summer, highlighted the continued use of option schemes as opposed to performance share plans ("PSPs") (also called long-term incentive plans ("LTIPs")) amongst AIM companies.

With the continuing pressure on companies to cut costs to improve the bottom line, could switching to a PSP/LTIP make a significant difference to a company's profit and loss account, whilst retaining motivational impact?

Report calls for activism over remuneration (The Guardian) - A report published by Pirc and Railpen calls for "investors to wield their power by exercising their right to vote on remuneration reports."

FTSE100 directors paid more than £1 billion (The Guardian) - A report by the Guardian reveals that FTSE100 boards have increased their salaries three times faster than average pay elsewhere in the UK.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2009. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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