Practical Guidance For Options and Rights Grant Governance and Process

Given all of the issues surrounding employee share and option grants it behoves board remuneration committees and company management to make sure they have at least certain governance basics in place.  This article suggests a checklist of standard “housekeeping” matters that the remuneration committee require of management.

Well in advance of the remuneration committee meeting to approve grants, management should prepare and forward at least:

• The draft committee resolutions for the committee’s approval
• A summary of the process for determining who will receive grants, what kind of vehicle is to be used, and how many grants should occur in any year
• A list of who is getting the grants and what position they occupy, making sure that executive directors and insiders are clearly identified
• Confirmation that shareholder approval has or has not yet been received for any executive director new issue
• How many shares, options or units per recipient and in total and how this compares to prior years
• The extent of dilution the proposed issue will create, and the “run rate” of how this compares with prior years
• The vesting schedules
• The grant date and
• How the price will be determined

The minutes should reflect the committee’s acceptance or otherwise on all these elements.

Follow up meetings after approval should include confirmation by management that all aspects have been carried out as per the last minutes, and that notifications have been lodged with ASIC and the ASX on time.

© Guerdon Associates 2024
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