Only 26% of companies that have launched an initial public offering (IPO) in the past four years operated share plans that allowed for awards of free shares to all employees, according to research by Deloitte.
Its research analysed the listing documents and remuneration reports of companies that joined the London Stock Exchange by way of an IPO between July 2010 to February 2014.
It found that more than two-thirds (70%) disclosed the operation of incentive plans, which were linked to the IPO event, before it occurred.
The research also found:
- The median aggregate share interest for directors and senior managers was around 7% of the share capital and 5% after excluding the founder shareholders.
- Around 40% of chief executive officers in place at the time of the IPO were paid below typical market levels, while around 25% were paid above.
- 92% of the listed companies intend to operate a performance share plan, structured in similar ways to those used in established companies.
- Around 80% of annual bonus plans in place at IPO and around 60% of long-term plans include clawback and/or malus provisions.
Mitul Shah, partner in the remuneration team at Deloitte, said: “Companies listing today are increasingly using the IPO as an opportunity to give shares to all their employees and are not just focused on senior management.
“An IPO requires commitment from all employees, but provides the opportunity to introduce share plans that motivate employees during this process.
“These plans can not only be used to help ‘lock-in’ key executives and senior management, but are also a great way to reward all employees and to share in the value created from a successful IPO.
“Management shareholding in recently listed companies is typically much higher than in established listed companies. In part, this reflects that the founder shareholders are often still part of the management in these companies, but it also illustrates the practice of operating pre-IPO incentive plans that allow management to receive significant numbers of shares in return for delivering superior returns for the shareholders, culminating in the IPO.
“This helps align the interests of management with all shareholders after the IPO.”
