Financial Modelling
The cost of a remuneration policy (particularly the accounting cost of share plans) is another key issue. Nine of our consultants are qualified accountants who can construct financial models to show the cost impact of a pay policy and provide IFRS 2 share award valuations.
Please try our Black-Scholes Calculator* to give you a broad valuation of the “fair value” of an award (excluding any impact of performance conditions).
With regard to performance conditions, almost all long-term incentive plans for executives incorporate such conditions, typically based on a company’s total shareholder return (share price growth and dividends) performance relative to a peer group or its earnings per share growth.
In order to ensure that these plans are relevant and valued by executives, companies need to provide regular, clear communication of on-going performance against their performance conditions. Remuneration Committees also generally require independent verification of performance and the extent to which awards can vest.
We currently provide a performance monitoring service for total shareholder return / share price performance conditions for over 80 companies. Further information on this service can be obtained from your usual contact at Hewitt New Bridge Street. A couple of examples of the sort of information that we provide to companies to help them communicate with their executives are.
*Disclaimer
The Black-Scholes calculator is intended for educational purposes only. The results obtained from using the calculator are not to be taken as a recommendation to buy, sell or trade any particular security of any kind.