Glass Lewis to support restricted share grants not requiring performance to vest

Glass Lewis UK have updated their guidelines with major changes to the policy on restricted share grants. It states that each grant will be judged on a case-by-case basis. However, they have provided the guidelines considered for approval.

The requirements are based on the guidelines from the Investment Association (see HERE). The features that must be met for support are as follows:

  • A discount of at least 50% when transferring LTI to fixed equity;
  • Total period before the grant can be realised by the executive is at least 5 years;
  • There should be large shareholding requirements, including a post-exit shareholding requirement of at least two years. Post-exit shareholding requirements are currently not common market practice in Australia, but that could change soon (see HERE);
  • The grant of the fixed equity should have appropriate underpins/gateways;
  • The grant should align with long-term strategy.

CGI Glass Lewis in Australia has not yet updated their guidelines to cover restricted share grants. In practice they have already supported restricted share grants for companies such as CBA and Origin Energy. Therefore, it is likely that similar requirements will eventually be set on Australian restricted share grants as frameworks away from one-size-fits-all LTI models and consider more varied incentive plans. The guidelines and other changes to Glass Lewis’s UK policy that we suspect may find their way into the 2022 Australian guidelines can be found HERE.

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