GEO INSIGHTS

India's robust IPO activity in 2023, with 234 listings raising US$7.89 billion, reflects the country's strong domestic economy and rising corporate earnings, positioning it as a bright spot amid global IPO trends. The second half of the year saw particularly buoyant activity, contributing to India's climb to the world's seventh-largest market by total market capitalization. With momentum carrying into 2024, India anticipates further IPOs across various sectors, driven by favorable market conditions, increasing foreign capital inflows, and a growing middle class investing in equity markets. Additionally, initiatives like the establishment of an international finance center in Gujarat aim to enable Indian businesses to access global capital markets more efficiently, signaling India's outward-looking approach amid its rise as a leading global economy.

Hong Kong-listed IT companies led investments in employee share plans with HK$38.5 billion, representing over half of the total spending in 2022. Healthcare followed with HK$11.5 billion and consumer discretionary with HK$9.7 billion. The adoption of employee share plans surged over the past decade, reaching 83.6% of listed companies by 2022, up from 66.1% in 2012, driven by strategies to attract and retain talent through share options and awards.

Australia is trailing behind the US and advanced European economies in implementing employee share schemes, as revealed by the first global survey spearheaded by tax partner Shaun Cartoon and lawyer Eileen Liu. Conducted by a team of specialists from Arnold Bloch Leibler, Baker McKenzie, KPMG, and Tapestry Compliance, along with issuers and academics, the survey measured operating environments across 26 countries. Australia's complex tax rules and regulatory constraints on unlisted companies have hindered the scaling up of share plans, with tax incentives playing a significant role in decision-making for companies.

Eni's Board of Directors has proposed an Employee Stock Ownership Plan (2024-2026) to be approved at the Shareholders' Meeting on 15 May 2024. The Plan, starting in Italy and gradually expanding to foreign subsidiaries, aims to enhance employee engagement and align with shareholder interests through annual grants of free shares and a co-investment model. This initiative is part of Eni's broader strategy to support its employees and underscores the company's commitment to valuing human capital amid economic challenges.

Airbnb has expanded its pay transparency policy to include total compensation, giving employees visibility over equity awards, base pay, and bonuses. This expansion follows Airbnb's initial steps toward pay transparency in 2022, when it began sharing base pay hiring ranges, and in 2023, when it allowed U.S. employees to access base pay ranges. The company believes that greater transparency around compensation fosters a culture of trust and accountability, and it conducts annual pay equity analyses to ensure fairness in its compensation practices.

Airbnb has expanded compensation transparency by providing all employees globally with access to their base pay ranges, bonus targets, and annual performance equity award targets. This move, along with previously sharing base pay hiring ranges on job postings in the U.S., aims to enhance consistency in compensation and build a culture of trust and accountability. Additionally, Airbnb has conducted annual pay equity analyses since 2015, finding no significant unexplained gaps in pay, as part of their commitment to fostering an inclusive and equitable workplace.

The Delaware Court of Chancery recently invalidated Elon Musk's equity compensation plan with Tesla, which was criticized for being excessively large compared to peer plans and lacking proper negotiation. The court found that Musk effectively controlled Tesla in the context of the award, and that the approval process was flawed, including misleading proxy statements and insufficient benchmarking. As a result, the court determined the award was unfair and ordered it rescinded.

Richer Sounds successfully transitioned to an employee share ownership trust, transferring 60% of shares from founder Julian Richer to employees in May 2019, overseen by RSM's People Advisory Services team. This transition involved corporate restructuring, maintaining business culture, and legal and tax compliance, ultimately preserving the company’s employee-focused ethos. The project, completed in 18 months, was well-received by the media, and employees received celebratory bonuses from Julian Richer, enhancing recruitment, engagement, and retention.

Startups often use equity compensation to attract and retain talent by offering employees a stake in the company, but the structure of this compensation can vary widely. Key decisions include how much equity to reserve for employees, which roles should be eligible, and whether to use stock options or RSUs, with considerations for vesting periods and exercise windows. While equity compensation can motivate and align employees with company success, it also risks dilution of founder control and can be complex to manage, especially across different jurisdictions and stages of company growth.