Pricing performance rights in a long term incentive grant
One issue to be aware of with LTI grants of performance rights (a performance right is a zero exercise price option entitling the executive to receive one fully paid share) is that performance rights always have value on vesting. Significant differences can arise if a company uses a fair valuation methodology to price the performance right or a VWAP price method. Resolution 3 on Qantas Airways 2015 AGM on 23 October 2015 seeks shareholder approval for a grant of 947,000 performance rights to the MD/CEO Alan Joyce. This is based on the ‘target value’ of the grant being 80% of his base salary of $2.125 million and the fair valuation of the right on 30 June 2015 of $1.75. Using the CSP of $3.16 on 30 June 2015 rather than the fair value, the number of rights granted would be 538,000.
1 stock mentioned
With a background in human resources, executive search and corporate law, Kym Sheehan brings unique perspectives on corporate governance and meeting resolutions to her work for The Executive Remuneration Reporter. The Executive Remuneration...
No areas of expertise