Employee Share Plan Guidelines: Third Edition.
(The following relate primarily to employee share schemes in listed public companies. For more information on employee share ownership (ESOPs) in private and unlisted companies, see our page "Private Company ESOPs". If you want to learn more about "what ESOPs are" - including their advantages and disadvantages - see our "AEOA Policy" page. For the Australian Government's ESOP tax information web-sites, see our "Links" page). See also our "Going Ahead with your ESOP" Discussion Forum for more information on how to set up an ESOP.
The AEOA is pleased to announce that the third edition of the “Employee Share Plan Guidelines” was released in February, 2007. The Guidelines are endorsed by the Australian Institute of Company Directors, the Australian Employee Ownership Association and the Australian Shareholders’ Association which collectively represent: company directors, employees and individual shareholders.
The AEOA was instrumental in establishing an Industry Working Party in 1992 which formulated these, and the earlier versions of the Guidelines.
See the "Employee Share Plan Guidelines, Third Edition"
The second edition of these Guidelines was published in May 2000. The publication of this third edition is necessary so as to incorporate and reflect obligations under the current law; accounting standards; and generally accepted good practice regarding the composition and disclosure of employee equity plans. Employee share ownership practices have evolved and will continue to develop in response to market conditions, relevant taxation concessions and international developments
The aim of employee share ownership plans is to encourage general employee participation in share ownership in their employer company and a collective effort towards improved company performance thereby increasing shareholder value. These guidelines provide guidance for boards and shareholders to use to develop employee ownership and incentive plans and provide guidance on the application of those principles. Boards are encouraged to develop ‘good practices’ when designing these plans and when seeking shareholder approval for them.
The Guidelines should also be used by shareholders to consider the quality and practice issues in employee share plans requiring approval at company AGMs. It has been unfortunate that in the past, criticism of employee share plans - while reasonable in many cases - has showed a lack of knowledge in how the benefits of properly structured ESOPs could be enjoyed by all shareholders.
The Guidelines are commended for informed use by all company shareholders. They are not intended to restrict a company's flexibility in designing plans which reflect their particular circumstances in order to retain, reward and motivate their staff and drive improved company performance, provided the plans are fully valued, expensed and disclosed in a manner which permits shareholders to assess whether they are appropriate.
February 2007
Australian Institute of Company Directors
Australian Employee Ownership Association
Australian Shareholders’ Association
The Investment and Financial Services Association (IFSA) joined with the above organisations to endorse the "Employee Share Ownership Guidelines" in April, 2007. IFSA is a national not-for-profit organisation which represents the retail and wholesale funds management, superannuation and life insurance industries. IFSA "Guidance Note no. 13 - Employee Share Schemes" can be seen at:
http://www.ifsa.com.au/public/content/ViewCategory.aspx?id=619 .
For those interested in executive remuneration - including equity compensation, incentive and ownership plans - you need to look at the similarly industry endorsed guidelines "Executive Equity Plan Guidelines" .
If you wish professional advice on any aspect of implementing or managing an ESOP in accordance with these Guidelines, please refer to our "ESOP Consultants" page.
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