Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

Given the market turbulence in Hong Kong, is the timing right for Employee Share Ownership Plans (ESOPs)?

ESOPs were first introduced by Peninsula Newspapers in the US in 1956. Since then, ESOPs have been regarded as one of the classic methods to invigorate businesses and induce impetus for growth.

Put simply, ESOPs give part of the shareholding of the company to employees whose work is closely related to the development of the company. The purpose is to give employees a sense of ownership, thereby promoting the sustainable development of the company. ESOPs may take various forms, such as share options, restricted shares, or employee share purchase plans. Share options give employees the right to buy a certain amount of shares of the company within a future period of time at a predetermined price and under predetermined conditions, and the difference between the option exercise price and the market price is the value of the incentive. Restricted shares allot a certain amount of shares to employees, which will be vested in the employees by a specific date in future, and the market price of the vested shares is the value of the incentive. Employee share purchase plans give employees the right to purchase shares of the company in accordance with certain conditions, and the difference between the market price and the purchase price is the value of the incentive.

Crisis or opportunity?

So no matter which type of incentive scheme is offered, employees can only benefit if the share price goes up. But throughout the first three quarters of 2019, the Hong Kong stock market remained volatile. The Hang Seng Index rose steadily from early 2019 to April, accumulating a growth of 20%. It then tumbled after April. The US, Hong Kong and the Mainland of China (the Mainland) are leaders in the global IPO market, but IPOs in Hong Kong shrank both in volume and in value. Some to-be-listed companies, in particular large ones, have faced the challenges of a reduction in IPO price, a reduction in their capacity to raise capital and delays in their listing plans. Going forward, in view of the trade war between the Mainland and the US, the development trends of the renminbi and social events in Hong Kong, the outlook for the Hong Kong IPO and secondary markets remains uncertain. Under such circumstances, should listed companies still implement ESOPs?

With the increase in the number of listed companies in Hong Kong and the growing popularity of the concept of share ownership incentives, the demand for ESOPs among companies and employees is still strong despite the volatility of the market. In particular, with mixed-ownership reforms going on in state-owned enterprises in the Mainland, the offering of effective incentive schemes has become a key subject for consideration. The ‘Notice on Matters Related to Effective Implementation of Stock Ownership Incentives of Listed Companies Controlled by Central Enterprises’ issued by the State-owned Assets Supervision and Administration Commission in November 2019 brings in major improvements to the requirements regarding the form and method of share ownership incentives, offering price, amount of offer and approval procedures. Under the circumstances, I believe offering ESOPs will remain the trend.

When the economic situation is unfavourable and there is a lack of impetus for business growth, employees are easily disincentivised, and the problem of brain drain tends to arise. Under such circumstances, the introduction of appropriate ESOPs to set clear direction for corporate and personal development and provide benefits to core employees is a good therapy to give assurance and incentives to employees and facilitate the long-term growth of the company.

Cost and benefit

From the perspective of costs to the company, offering ESOPs at a time when the share price is low means relatively low cost. Take share options as an example. Current share price is the key factor affecting the value of the option and the cost to the company. The cost of ESOPs is determined and amortised on the basis of the average share price on the day of granting the option. So the offering of options at a time when the share price is low would mean a relatively low cost to be determined and amortised. Regarding restricted shares plans, the shares granted are usually shares bought on the market or new allotment. At a time of low share price, the cost of share buyback would be low, and the buyback is positive news that could enhance market confidence in the company’s shares.

From the perspective of the long-term benefits to the employees, rewards obtained at a time of low share price represent greater potential in value growth. For example, the benefits of share options to employees comes from the difference between the market price and the exercise price of the option. According to Chapter 17 of the Listing Rules of the Stock Exchange of Hong Kong, the exercise price of options must be at least the higher of:

  • the closing price of the securities as stated in the Exchange’s daily quotations sheet on the date of grant, which must be a business day, or
  • the average closing price of the securities as stated in the Exchange’s daily quotations sheets for the five business days immediately preceding and including the date of grant.

Therefore setting the exercise price at a time when the share price is low means a relatively low exercise price and greater potential for future gain.

Start planning early

Introducing an ESOP is no easy task. It involves the design of the plan, tax planning, setting up of a trust, reporting to the foreign exchange administration authorities, establishment of a platform for information management and exercise of options by and sale of shares to employees, as well as the final inflow of funds. The parties involved include the company itself, human resources consultants, accounting firms, law firms, trust companies and securities firms. Therefore companies should start planning and preparatory work early.

Currently, the market is volatile and the economic situation is unfavourable, but ESOPs remain indispensable. Offering ESOPs at this time means attracting and retaining staff at lower cost and offering greater room for asset appreciation to employees. Moreover, offering ESOPs is the general trend. This is an important tool to invigorate businesses and promote sustainable development.

Alix Chan, Director,
BOCI Securities Ltd

Wendy Ho FCIS FCS(PE),
Executive Director, Corporate Services,
Tricor, Hong Kong
(Provision of Professional Trustee Services)

 

股權激勵時機如何?

香港市場動盪,現在是實施股權激勵機制的適當時機嗎?

自從1956年美國的Peninsula Newspapers拉開員工股權激勵序幕後,股權激勵一直被視為激發企業幹勁與活力的經典法則之一。

員工股權激勵((ESOP))簡單來說就是將公司的部分股權給到與企業發展息息相關的員工,增強員工的主人翁意識,從而推動企業可持續發展。員工股權激勵的方式有股票期權,限制性股票,員工股票購買計劃等。股票期權是授予員工在未來一定期限內以預先確定的價格和條件購買本公司一定數量股份的權利,行權價與市價之間的差價就是獎勵員工所能得到的收益;限制性股票是授予員工一定數量的股票,於指定時間歸屬至員工名下,歸屬股份的市價就是獲獎勵員工所能得到的收益;員工股票購買計劃是員工按照規定條件購入公司股票,市價與購買價之間的差價就是獎勵員工所能夠得到的收益。

危或機?

綜合上面介紹,無論哪種獎勵計劃,股票價格上漲員工才會獲得收益。但是縱觀2019年前三個季度,港股市場的“不確定性”貫穿始終。恒生指數從年初至4月份穩步上漲,累積上漲20%,4月之後開始震盪下跌。全球的IPO市場由美國,中國香港,中國內地“三輛馬車”拉動;但是香港IPO市場現“量價齊跌”,部分企業特別是大型企業上市時面臨下調招股價、縮減集資規模、甚至推遲上市等挑戰。未來受中美貿易戰、人民幣走勢以及本地社會運動影響,港股二級市場以及IPO市場走勢仍然不明朗。這種形勢下,上市企業是否還應落實員工股權激勵計劃?

雖然市場震盪,但是隨著上市企業數量的增加以及股權激勵概念的普及,企業以及員工對股權激勵的需求依然旺盛。特別是隨著中國內地國有企業混合所有制改革的推進,建立行之有效的激勵約束機制成為重大課題。2019年11月國資委發佈的《關於進一步做好中央企業控股上市公司股權激勵工作有關事項的通知》對股權激勵的方式與方法、授予價格、授予數量、審批程序等方面的要求都有不小的突破。因此筆者相信現時情形下股權激勵依舊是大勢所趨。

在經濟低迷,企業增長乏力的狀態下,容易發生員工積極性受挫,人才流失等問題。因此在此時機下,實行適當的股權激勵機制,明確公司以及個人發展目標,綁定核心人員的利益,是穩定軍心,激發幹勁,實現企業長遠發展的一劑良藥。

成本與效益

從企業的成本角度考慮,股價低迷的時候實行股權激勵計劃產生的費用相對低廉。以期權為例,股票現價是影響期權價值以及企業成本的重要因素。股權激勵計劃的成本是按照授予日股份平均價擬定、攤銷。因此在股價處於低位時授予期權需要擬定以及攤銷的費用會相對較低。對於限制性股票計劃,多數授予的股票是來源於上市公司於市場上購買股份或認購新股份,一方面在股價低迷的時候購買股份則成本相對較低;另一方面回購作為正面消息,亦可以提振市場對該公司股票的信心。

從員工長遠收益角度考慮,股價低迷時取得的獎勵更加具有增值潛力。以期權為例,員工的收益是市場價格與期權行使價格之間的差額。根據香港聯交所上市規則第十七章,期權行使價格須至少為下列兩者中的較高者:

  • 有關證券在期權授予日期(必須為營業日)的收市價(以交易所日報表所載者為准);及
  • 該等證券在期權授予日期前5個營業日的平均收市價(包括授予日;收市價同樣以交易所日報表所載者為准)。
  • 因此股價處於低位的時候行使價格的設置相對較低,從而使得未來收益潛力更大。

及早籌劃

股權激勵是一個系統性的龐大工程,一方面涉及激勵計劃設計、稅務籌劃、信託設立、外管報備、資料管理平臺建立、員工行權/出售和資金回流等環節;另一方面也涉及企業自身、人力咨詢機構、會計事務所、律師事務所、信託機構、券商等機構。因此企業亦需盡早籌劃,提前佈局。

以限制性股票計劃為例,雖然並沒有如股票期權般有上市規則第十七章規範,上市公司在執行上仍然需要注意符合其他上市規則規定。例如,給予資金予受託人購買股份、授予限制性股票均不可在禁止買賣期進行。又例如以發行新股去滿足股份歸屬至董事,會構成關連交易而引致需要獨立股東批准等等。因此,選對上述專業服務機構,尤為重要。

現時市場動盪,經濟低迷,但是股權激勵依然必不可少。一方面股權激勵使得企業可以利用較低的成本吸引以及留住員工,並且給予員工更大的財富升值空間。另外一方面股權激勵是大勢所趨,是激發企業活力,推進企業實現可持續發展的重要工具。

陈晓兰, 董事
中银国际证券有限公司

何咏紫FCIS FCS (PE), 企業服務執行董事
卓佳•香港
(提供專業受託人服務)

 

 

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone