GEO INSIGHTS

The Asian Utilities Engagement Programme (AUEP), led by the Asian Investor Group on Climate Change (AIGCC), focuses on linking executive compensation to climate-related Key Performance Indicators (KPIs) in Asian utilities. The program urges these companies to implement governance frameworks for climate issues, establish decarbonization timelines, disclose climate information according to TCFD guidelines, address physical climate risks, and ensure their lobbying activities align with climate objectives. Several companies, such as Japan's J-Power and Chub Electric, as well as Malaysia's Tenaga Nasional, are already incorporating sustainability KPIs into their compensation structures, and the program plans to expand its engagement to regulators and other markets.

The article discusses the significant increase in CEO pay at the crown estate, an ancient portfolio of land and property in England and Wales. The current CEO, Dan Labbad, received almost £1.6 million last year, triple his pay in 2019, and far surpassing his predecessor's salary. The rise in compensation has raised concerns about the management of taxpayer funds and calls for reform to ensure the income from the crown estate benefits the nation appropriately.

The article covers Cornish Metals Inc.'s recent corporate update, highlighting the grant of 11 million incentive stock options to its executive management and senior staff as part of a Long Term Incentive Plan (LTIP). The options are priced at £0.18 per share and will vest over three years, expiring on July 17, 2028. This grant brings the total options issued to 3.02% of the company's Issued Capital. Additionally, the article briefly mentions the appointment of sub-committees of the Board following a recent Annual General Meeting.

This article serves as an introductory guide to equity compensation plans, particularly addressing common inquiries from founders. It focuses on two essential aspects: types of equity compensation, such as stock options and restricted share units (RSUs), along with their distinctive features and potential tax implications. Additionally, the article emphasizes the significance of establishing a formal equity compensation plan, often referred to as a stock option pool or an equity compensation pool. The allocation of securities in this plan impacts the fully-diluted ownership percentages of existing shareholders and allows corporations to benefit from preferential tax treatment.

The U.S. IRS released a memorandum, offering guidance on how to source income from restricted stock units (RSUs) for U.S. Social Security (FICA) purposes when the vesting period spans multiple tax years. This guidance provides employers with some clarity on adapting income tax regulations to apply to FICA tax, reducing uncertainty and potential issues during IRS audits. While the memorandum is specific to RSUs granted to U.S. citizens and residents, its principles can be applied more broadly to other forms of multi-year compensation, nonresident aliens, and different types of employers.

The article examines the widening pay gap between CEOs in the S&P 500 and the U.K.'s FTSE 100 from 2018 to 2022. The disparity is primarily attributed to the influence of long-term incentive plans (LTIPs) and pay opportunity levels in S&P 500 companies. Median CEO pay for S&P 500 CEOs has notably increased compared to FTSE 100 CEOs during this period, despite a decrease in the gap in basic salary and bonuses when adjusted for market cap and revenue growth since 2019. Interestingly, both regions have witnessed declines in median vote support levels for say-on-pay proposals, indicating growing investor discontent with executive compensation, irrespective of differences in corporate performance.

From 1 October 2023, the withholding rate for Indian Tax Collected at Source (TCS) on foreign remittances will increase from 5% to 20%. The INR 700,000 exempt threshold for TCS will remain in place, providing relief to individuals subject to the tax. However, the higher TCS rate above the exempt threshold may impact participation rates in employee share purchase plans, as individuals will receive reduced benefits and may face challenges reclaiming the TCS.

The article discusses Geneva's evolving tax practices regarding employee stock and option grants, focusing on startups and SMEs. These incentive programs play a crucial role in attracting and retaining talent, and their tax treatment varies, ranging from tax-free capital gains for employees to fully taxable salaries upon exit. The recent practice in Geneva allows valuations as substitutes for FMV, offering tax-free capital gains and enhancing the benefits of share plans for early-stage startups and SMEs without imminent full exits.

The study explores the impact of a pay restriction on CEOs of centrally administered state-owned enterprises in China, showing significant pay reductions for CEOs in these firms compared to unrestricted counterparts. In response to the pay cut, CEOs in the affected firms increased their use of perks and diverted company resources for personal benefit, leading to a decrease in pay-performance sensitivity and a drop in overall firm performance. The findings serve as a cautionary note against limiting CEO pay, as it can distort incentives and have unintended adverse effects on the companies' performance.