“We are planning to introduce a further two year holding period for LTIPs so they will not be available to the participants until the expiry of five years from grant. Are other companies planning to make this change and, if so, to what extent is the increased holding period being applied – i.e. is it just being applied to PDMRs or to all participants in LTIP schemes?”
In light of comments from Fidelity and others, the Remuneration Committee has recently decided to require executive Directors to hold shares arising from an LTIP award for a period of five years from the date of grant, with only those shares required to cover a tax liability on exercise of an LTIP award permitted to be sold. However, we have left the performance period at 41 months.
We have just consulted with shareholders on a new three-year special purpose plan, and will introduce a two-year holding period following vesting for all LTIP participants(PDMRs and Ops Board).
The current plan is for an increased (2 year) holding period to be applied for the executive directors only. We have a sizeable shareholding requirement too for directors, and with both EDs well above this level, seemingly they could simply sell other shares making the increased holding period a nonsense. It would, I recognise, make more sense where shareholding requirements are not in place.
We introduced a new long term incentive plan this year following extensive discussion with key shareholders and wider written consultation. We extended our holding period from 3 years under our old scheme to 50% release in year 4 and 50% release in year 5 (effectively a 4.5 year holding period) and have a 200% of salary holding requirement for EDs. The shareholder who has publicly adopted a 5 year holding requirement was part of the consultation and raised no concerns about our proposed holding period at the time of consultation. We do not intend to increase our holding period now that they have post facto changed their position.
This was considered as part of our recent executive remuneration review, but the Committee decided to increase the shareholding requirements instead to 300% for the CEO and 200% for the other EDs. We have been to shareholders to consult on the proposed changes and only one shareholder has stated that they would have preferred a post-vesting holding period.
We have a 3 year performance period under our LTIP and no plans to increase this despite the pressure from PIRC etc. Our shareholding guidelines require exec directors to build up a shareholding equal to 200% of salary, after which they can sell all shares subsequently received. To introduce an additional requirement that they hold the shares they would otherwise have sold to realise cash would have a demotivating effect and could force the execs to sell some of their existing shares. We are however about to introduce a deferred bonus arrangement whereby 25% of each annual bonus payment is deferred into shares to be held for 2 years.
We have no current plans to extend the holding period for LTIPs beyond the current three year vesting period. We do, however, have a shareholding guideline for all executive directors whereby they are expected to hold shares equivalent in value to 200% of salary within five years of appointment.
We increased the holding period for restricted shares to 5 years from grant under a new Incentive Plan. It went down well with investors.
we are also increasing the holding period by 2 years, but just for PDMRs and not others lower down.
We considered introducing a further holding period at a recent Remuneration Committee meeting, however, the idea was rejected. The Committee was of the opinion that our shareholding requirement effectively means, in the years immediately following appointment, directors have to retain their shares to meet the requirement. Those with a holding in excess of the requirement could simply sell other shares they had thus making the holding period ineffective.
We explained the position in the Annual Report by saying “Since the AGM one shareholder has adopted a public policy which seeks a minimum holding period of five years between the date of grant of any shares and the sale of those shares. Given our substantial shareholding requirements and the fact that our Executive Directors normally retain their vested shares, the Committee is not currently persuaded that such a rule is necessary for Imperial Tobacco. We shall, however, continue to follow discussions on this point and keep the matter under review” .