Top 100 CEO Interviews
Issue No. 37 - October/November 2007
Using equity packaging to lure talent
by John Rawson
Like me you have probably seen and read reports about executive salaries and asked yourself: ‘How can companies offer so much?’ This question is usually followed pretty quickly by, ‘How do I get a piece of
the action?’
To address the above questions an employer needs to have a reward system in place that:
Publicly listed companies often use equity (for example, issuing shares or options), when designing competitive strategies to attract, retain, and reward employees for value they create within the organisation. These schemes can be very tax-effective as the Australian tax system has a concessional regime for capital gains. The concession — a 50% CGT discount — is no doubt attractive to employees in equity-based remuneration schemes.
Private companies, and there are many in the Top 100, face the same pressures as public ones in terms of needing a competitive remuneration strategy to attract talent. Personal experience has shown many private companies are not aware they can include equity-based remuneration in their rewards strategy.
Outlined below are strategies private companies can use to benefit from equity-based reward schemes — along with some of the issues to be considered.
Valuation: Addressing the key question of value, and how to determine it, is a fundamental commercial issue. Formal valuations are costly and onerous. A valuation methodology, based on earnings per share for example, that is consistently applied may be appropriate (as for...
