Restricted stock units (RSUs) are common across most developed markets. Large companies provide them to management and professional employees in the US, Canada, UK, Australia and many European countries such as Sweden, Ireland, the Netherlands, and Switzerland. They are ubiquitous as a top executive reward component in the US, and Canada. Until very recently this was not the case in the UK. But that has changed, with many large FTSE companies flagging in their most recent policy reports that executive RSUs will be provided. The UK change was necessary to as one of several initiatives needed to stem the loss of listed companies to private capital or more conducive capital markets such as North America.

Australia was a little more open than the UK up to its recent change. Several ASX listed companies now provide RSUs. It has required a bit of arm twisting and compromise to get there. Generally the result, in terms of executive ownership and alignment, has been positive. However, in stemming the tide of executives jumping off the wagon to go private, or their boards relocating the listing to North America, there is probably some way to go.

Recent developments are likely to facilitate the trend. Trade policies and geopolitical dynamics have disturbed the relative stability of global markets. During these times of uncertainty, it is worth reconsidering the current long-term incentive plan. Find a checklist on remuneration during uncertain times HERE.

In periods of uncertainty, long-term incentive plans (LTIs) become particularly susceptible to concerns and difficulties in setting long-term goals and selecting performance measures. Further still, locking in long term incentive measures and targets restricts agility and responsiveness, a trait that is valuable during volatile market conditions.

RSUs offer direct and certain alignment between shareholders and management. Implementation usually means replacing part or all of incentives. Shareholders and proxy advisors are more open to time-vested equity with the expectation of reduction in grant value to account for certainty in vesting. Ownership Matters and Glass Lewis have indicated that a discount of “at least 50%” is expected when replacing an LTI with an RSU. ISS Australia remains opposed to RSUs in most circumstances initially, although tends to be more accommodative with the passage of time.

To assess the current landscape of RSU plans we considered remuneration for ASX 100 CEOs using FY24 disclosures. RSUs are substantially more prevalent in foreign incorporated ASX listed companies. Curiously, shareholders appear to have no problems when they grant their executives RSUs, and pay more, than their locally incorporated counterparts. With a nod to the change in DEI sentiment, we omitted foreigners, resulting in a sample size of 90 CEOs. Data for 30-day market capitalisation to 6th May was sourced from LSEG (formerly Refinitiv®).

Table 1: CEO RSU Fair values and opportunity – summary statistics

 

Restricted share units are increasing in prevalence in the ASX100 with 11 companies (12%) electing to feature them in their executive remuneration. Of these companies, 4 companies were in the financial sector.

Median fair value of RSUs offered was $1.53m, with median pay mix of RSUs being 20% of total remuneration (TR) as seen in Table 1. Median opportunity as a percentage of total fixed remuneration (TFR) was 68%. Ten of the 11 companies retained an LTI with vesting subject to performance after RSUs were introduced. The LTI maximum fair value was 22% of total remuneration at median, a smidge more than the RSUs.

At just 12% of larger ASX companies providing executives with direct “skin in the game” Australia may find itself a laggard in terms of executive and shareholder alignment, as well as coping with uncertainty. While there are variations in support depending on each company’s shareholder base, there does not appear to be any major issues applying RSUs as a component of reward. As to whether it is appropriate and right for a company’s circumstances depends on where its needs fit against a checklist. Look our for it in news articles to come.

© Guerdon Associates 2025 Back to all articles