“Our advisors have stated that our executive directors should not be permitted to cancel their SAYE savings schemes if, for instance, they wish to participate in a new scheme which has a lower option price than an existing scheme. Has anyone else received this advice?
If a director has cancelled an SAYE savings scheme, has anyone released an RIS on the subject? Or would you wait to disclose in the Remuneration Report?”
We took advice from our Broker who commented that he did not foresee a problem. We did, however, carefully word a standalone RIS to manage any possible negative market reaction (of which we did not receive any).
To avoid any problems with the timing of the £250 limit check by our SAYE carrier the directors withdrew a few weeks before the date of grant. The Broker advised the withdrawal could fall within the remit of DTR3.1 and therefore we were safest to issue an RIS announcement as soon as the withdrawal (and therefore the lapse of options) was effective.
I doubt that you can stop people cancelling on an individual basis where the proposed lower option price for a new grant would prompt people to do so, whether directors or not. However, the cancellation accelerates the accounting charge in that it is taken in full in the year of cancellation rather than being spread over the 3 or 5 years of the savings period. There is also a further charge in respect of the new options. We received advice that it may be possible to offer people the opportunity to ‘roll over’ the savings from the old option grant into the new one, without the charge being incurred. However it became clear that this was still being debated among the top 4 accounting firms so is not yet ‘ a runner’.
In line with other respondents – we allow directors and PDMRs to cancel SAYE options and announce it as part of the grant announcement. Similar to others, this has not attracted any adverse comment.
Our experience is in line with other respondents- we allow directors and PDMRs to cancel and announce it as part of the grant announcement. This has not attracted any adverse comment.
Same position as previous commentators. Directors churned 2007 SAYE at 79p for 2008 SAYE at 49p, which was announced. 98% of other employees in the 2007 scheme did exactly the same. No adverse comment received.
My only other comment would be to change your advisor …
Although directors should be treated as any other employee in respect of SAYE options (most rules allow for employees to cancel their option at any time without providing a reason), given that cancellation of options gives rise to a P&L charge (as does issuing new options), it could be construed that in doing so a director would not be acting in the best interests of shareholders by creating an additional charge where they are looking to gain personally form doing so (especially if they re-subscribe for options at a lower exercise price).
I believe there is a view that Executive Directors should be confident in the long-term growth of their Company and therefore should remain within existing SAYE contracts. However, given the changes in current share prices and the markets in general, we feel this view is difficult to justify.
We have not sought advice on this subject but for the last couple of years have allowed our directors (and PDMRs) to cancel existing SAYE contracts and participate in new schemes with lower option prices. We have included the information on the cancellations in the new award/grant RNS announcements, as well as in the following Rem Report. No adverse feedback has been received.
Our experience has been exactly the same. The cancellation was treated as a dealing and announced. No adverse reaction was received. I think this is common practice at a time of falling share prices. The whole purpose is to incentivise employees (including management).
We have never sought advice on this subject, but a number of our directors and PDMRs have cancelled their SAYE contracts and participated in the new scheme with a lower option price. Our standard clearance procedure was followed and RIS announcements were made on each occasion. No adverse feedback was received.