GEO INSIGHTS

Thousands of Royal Mail employees are being asked to sell their shares to Czech billionaire Daniel Kretinsky, who seeks to buy Royal Mail's parent company, International Distribution Services (IDS). Kretinsky's investment group, which already owns 27.5% of IDS, needs the approval of shareholders representing three-quarters of the company, with major asset managers holding most of the remaining shares. The board of IDS has recommended accepting Kretinsky's offer of 370p per share, though the government could block the deal due to Royal Mail's national importance, and there are assurances to maintain Royal Mail's UK headquarters and employment agreements.

A recent survey found that 60% of companies globally apply ESG targets to share-based employee compensation, with CO2 reduction, diversity, and corporate governance being the most common areas. Among those using ESG targets, 84% apply them to management board incentives, while 40% use them for short-term incentives and 30% for long-term incentives. The survey also indicated that institutional investors and proxy advisors significantly influence these targets, and a growing number of companies are focusing on ESG issues as part of their employee compensation strategies.

On June 21, 2024, Howden announced that 656 employees have invested in the company through its 2024 Internal Share Offer (ISO), increasing the total number of employee shareholders to about 5,200 across 48 countries. Howden, the second largest employee-owned business by turnover in the UK, attributes its sustained growth and success to its employee ownership model, which also benefits its charitable Foundation. The company’s model is highlighted by recent research showing higher productivity and profitability in employee-owned businesses, and Howden is actively supporting the employee ownership sector by sponsoring the UK Employee Ownership Awards 2024.

A phantom stock plan is an employee benefit that provides the financial benefits of stock ownership without actual stock, tracking the company's stock price and paying out any resulting profits. These plans can be structured as appreciation-only, which pays out based on stock price increases, or full-value, which includes the value of the stock and any appreciation. Although phantom stock plans offer flexibility and align employee incentives with company performance, they do not provide actual ownership or voting rights and are taxed as ordinary income, requiring careful legal and tax compliance.

Elon Musk is encouraging Tesla employees to excel by suggesting they could qualify for a new stock option grant program for high performers. An internal memo revealed that Tesla will conduct a comprehensive review to award stock options for exceptional performance, as well as offer ongoing spot option grants for outstanding contributions. Despite not awarding merit-based stock grants last year due to financial challenges, Tesla plans to reward employees with long-term financial incentives through this new program, aiming to boost productivity and recognize significant achievements.

New data from the Department for Work and Pensions (DWP) shows a widening geographic inequality in company share schemes, with only 3% of households in Scotland participating compared to 5% in London and 7% in Inner London. This disparity is even more pronounced in Northern Ireland, the North East, and the West Midlands, where only 1% of households are involved. Additionally, the gender gap in access to share schemes has doubled, with men now four times more likely than women to benefit, highlighting a significant "equity inequality" that needs addressing for broader economic growth and productivity.

Trafigura proposed share clawbacks for breaches of confidentiality and its code of conduct, as revealed in a letter from CEO Jeremy Weir, following a premature disclosure of losses from its Mongolian oil operations. The clawback policy applies to both current and former employees and could prevent ex-employees from receiving payment for their shares. The proposal is part of regular governance review and is not linked to specific personnel changes or jurisdictions, although recent high-level departures from the company have been noted.