GRG Remuneration Insight 114

by Chris Godfrey, James Bourchier & Denis Godfrey
15 February 2019

Introduction

As previously indicated in our Remuneration Insight 113 which dealt with observed market practices in relation to the usage of general employee equity plans (GEEPs) – also commonly referred to as employee share schemes (ESSs) – in the ASX100, this Insight presents the findings of our extended analysis of the ASX300.

Copies of GRG Remuneration Insights that provide additional information on GEEPs are available on a complementary basis on this website. These include an outline of how each type of plan operates, applicable restrictions and requirements, and a high level analysis of their advantages and disadvantages.

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Overview of ASX300

The following table provides an overview of the ASX300 in relation to the use of GEEPs.

Overview of the ASX300 in relation to the use of GEEPs

The data indicates that the use of GEEPs increases as company size grows. This is unsurprising as most plans are of limited value, cumbersome and involve significant company cost in addition to the costs of administration. However, there are strong reasons for companies to reconsider the use of GEEPs and which, in no particular order of importance, include:

  • the recent development of more cost effective plans, including one which is likely to be cost neutral in normal circumstances,
  • the growing recognition of the need for improved employee engagement and participation,
  • the focus on organisational culture and its flow-on impact on customer service and shareholder risk,
  • community, political and RBA pressure on companies to respond to stagnant employee pay levels,
  • continued expressions by the Government and other external stakeholders that employee share ownership should be encouraged and expanded in the interests of all stakeholders, by sharing wealth creation opportunity and increasing fairness, and
  • ongoing concerns about the government seeking ways to increase taxing of superannuation which will lead to superannuation being less appealing as a retirement saving vehicle.

Plan Type Usage

The following tables present plan type usage by company for sectors and indices.

GEEP type usage by company for sectors and indices
GEEP type usage by company for sectors and indices
An overview of the ASX300 in relation to the use of GEEPs

Comments

The following observations relate to usage of GEEPs among the ASX 300 constituents:

  1. Despite its limitations, the Tax Exempt Plan (TEP) is the most widely used, and on occasion in combination with another plan.
  2. The Salary Sacrifice Share Plan (SSSP) is the second most frequently used plan although to a much lesser extent than the TEP, probably due to its restrictions and lack of flexibility.
  3. Other variations to the TEP and SSSP plans have been used but to a minor extent.
  4. The recently emerging Share Save Plan is starting to gain traction due to its flexibility and superior benefits for both company and employees.

Please contact GRG for more information regarding the Share Save Plan. It has all the real benefits that come from utilising a GEEP without the limitations, restrictions, costs or burdens that apply to TEPs and SSSPs.

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