Employee Share incentives in UK

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1、EmployeeshareincentivesintheUKMarch2011ExecutivesummaryManycompaniesestablishshareincentiveschemestoenableemployeesandseniorexecutivestobecomeshareholdersinthebusinessforwhichtheywork.Thereareseveraltypesofschemethatarecommonlyimplemented.Someschemes–particularlythosethatare

2、availabletoawiderangeofemployees–attractgeneroustaxreliefs.Thisguidelooksatthemaintypesofshareincentivescheme,concentratingonschemesthatalistedcompany,oracompanyapproachingIPO,maywishtointroduce.Manyofthestructuresdescribedherecanbereadilyimplementedforemployeesbasedoutsidet

3、heUK,butwithoutthetaxreliefsdescribedhere.ArrangementsforexecutivesThemainshareincentiveschemesforexecutivescompriselong-termincentivesplans(LTIPs)(alsoknownasperformanceshareplans)andexecutiveshareoptionschemes.Thesearebothdescribedinsection2.LTIPsarenowmorecommonthanexecut

4、iveshareoptionschemes,althoughsomecompaniesoperatebothtypesofscheme.UKinstitutionalshareholdersinlistedcompanieshavedevelopeddetailedguidelinesgoverningtheusageofshare-basedincentives.Theserequireachallengingcorporateperformancetargettobesatisfiedbeforeanawardoroptionmayvest

5、–thuspreventinganexecutivefrombenefitingunlessthecompanycandemonstratetheachievementofdemandingfinancialperformance.Theguidelinesrecommendthatshareincentivesshouldbepartoftheannualremunerationpackageandbegrantedonanannual,phasedbasisratherthaninasingleblock.Theyalsoimposelim

6、itsonthedilutionofequityarisingfromshareissuesonexerciseofoptionsorvestingofawards.Companiesalsooperatearrangementsunderwhichexecutivesreceivepartoftheirannualbonusinshares.Thismayinvolvesimplythedeferralofsomebonusintosharesthatvestafteracertainperiod.Alternatively,thedefer

7、ralmayattractamatchontermsthatextrashareswillbeprovidedifthedeferredsharesareretainedforanumberofyears(and,usually,aperformanceconditionisachieved).Thesearedescribedfurtherinsection3.Generally,executivesarerequiredtobuildupsignificantshareholdingsintheircompanyinreturnforsha

8、reschemeparticipation,sothattheirinterestsaremorecloselyalignedwiththoseofs