Under the CGT changes proposed in 2026 Federal Budget, which executive equity plan structures may become less effective and which could deliver stronger outcomes?
One of our most asked questions is: “how often should the board review executive and director remuneration?”. The simple answer is that the incentives of executive remuneration need to be reviewed annually, all and other aspects not far behind.
Leveraging executive LTI rights can align incentives with shareholder value and, with vesting scale adjustments, deliver leverage comparable to or exceeding options.
The setting of remuneration for directors and senior executives needs to consider market practice for similar roles, in companies that are similar to theirs – competing for the same talent.
Long term equity traders know that short term losses during in a market dip can be outweighed by purchases of equity at lower prices. But this doesn't appear to be grasped by "sophisticated" participants in long term incentives (LTI) – nor, apparently, by company boards.
We define and discuss the difference between best practice and the market in the mix of STIs and LTIs for executives, and look at whether deferral of STI into equity is a valid substitute for LTI.
Every KMP remuneration program has its bugs, and managing the unintended outcomes and exceptions consumes time that could be spent on valuable strategic work. We explore some of the most common bugs in remuneration frameworks and governance, and how to avoid or patch them.
Where STI is deferred, recent court rulings compel this to be clearly articulated in all STI plan documentation – and to be clear about when the reward has been “earned”. Large companies should review their current STI deferral practices, and smaller companies should introduce STI deferral in line with best practice.
Across listed, unlisted and not-for-profit companies, many nuances need to be considered when setting market competitive NED packages, requiring expert knowledge and tailored approaches to market data.
The ASX has effectively outlawed the use of board discretion to waive or reduce vesting conditions for options and performance rights, which captures virtually all equity used as part of remuneration. This represents an onerous intrusion by the ASX in the governance of executive remuneration.