Are people aware that the shareholders have already voted for a performance rights package that amounts to $31.5 million in shares across 6 directors by the time the share price reaches $3.50? That is, the current performance rights package (which has a 5 year expiry) is still in play - i.e. performance targets have not been met and the new package does not replace the old. The new performance rights package is
in addition to the old package. The reason I ask is because I keep seeing comments from people saying that it is good to incentivise management, which I agree with, but we already have a generous performance rights package in place for that purpose.
What we are voting for this time around is to
double that performance rights package (even though the last one has not been met) but at lower share prices so it can be achieved more easily. How is this an incentive for higher performance?
This is the
current (already agreed to) performance rights:
At a share price of $3.50 they will have earnt $31.5 million worth of shares (highlighted in yellow above).
This is what the
new performance rights package would look like:
Basically $63 million in shares across 6 directors by the time we hit $3.50.
Look at the "Incremental Actual Value" column as an example - this shows that when the share price moves from $3.25 to $3.50 (a 7.6% move in share price) the directors will be given $13,275,000 in shares. This is an average of over $2.2 million per person for a 25c increase in share price - a performance bonus of 15.77% of the increase in the entire market capitalisation. It's a similar story every 25c all the way from $2.50 to $3.50.
I think the current package that was agreed to only 9 months ago now is more than enough incentive (the 1st table above). In addition, they each already have their own existing holdings which also provides an incentive. It's one of the things you look for in a stock - i.e. directors/management with their own skin in the game.
Gifting even more free shares just reduces the cost/pain to the directors if they end up making decisions that dilute shareholder value (or fail to maximise shareholder value). You get to a point where gifting even more free shares actually incentivises the exact opposite behaviour of what you want. Behaviour which includes selling down their holdings and reloading their shares all the way up - they should be incentivised to hold on to their shares. You achieve this by not giving away too many freebies.
Anyway... I just thought I mention this because it seems that some people are unaware that there is already a generous performance rights package in place... it's just that the market has gone against them for the time being so it wasn't so easy to hit the share price targets as what they thought it would be - but the downturn in the market has hurt all of us... nobody is immune to the downturn and it's not really fair to make yourself immune (or actually profit from it in this case) at the expense of others... If the share price was currently $3 and they were half way to receiving all their performance shares would we be talking about another performance package right now? Probably not, which means we are essentially talking about issuing
new performance shares
because of non-performance! I find that quite incredible.
The question I have is: Why does the performance package need to double from what has already been agreed to? What has changed?
These are just my thoughts... I don't mean to direct this at you
@luke086... it's more general commentary for those that might not be aware of some of this history or what's already on the table.
(20min delay)