SeedCo revisits incentive scheme

SeedCo revisits incentive scheme
Published: 05 October 2017
LEADING producer and marketer of certified crop seeds, Seed Co, has revised its employee incentive programme.

The company is now granting employees shares equal in value to the appreciation of the company's shares on the stock exchange.

Previously, the company had a share option scheme, where employees granted with the options had the right to buy shares at the market price of the shares on the date the options would have been granted, regardless of the market price on the day that they exercised their options.

Company shareholders passed this resolution at the company's 22nd annual general meeting held last Thursday.

The board of directors had proposed that the company migrate to an incentive scheme in which the company would only issue shares or pay a cash equivalent to the gain or appreciation of the shares on the date of exercise.

Shareholders resolved that the company instead issue shares equivalent to the gain or appreciation of the shares on the date of exercise, leaving out the option of a cash payout.

The National Social Security Authority (NSSA), which has a five percent stake in Seed Co, proposed the amendment to leave out the possibility of the appreciation rights to be paid out in cash.

They were concerned that allowing for a cash payout might risk Seed Co's liquidity position, particularly in cases where share prices were influenced by extraordinary market forces and not necessarily the performance of the business itself.

In making their case, NSSA cited the current bull run on the Zimbabwe Stock Exchange.

SeedCo chief executive officer, Morgan Nzwere, pointed out that the resolution should not be looked at only in the context of the current market activity, but in view of the fact that the board had resolved to propose the share appreciation rights before the local bourse's current rally.

The board of directors said the resolution was proposed in an effort to reduce the dilutive effects of the old share option scheme as well as to eliminate the administrative difficulties of asking employees to raise the amounts to pay for the shares when they exercise their share options.

The old arrangement was known as the Share Option Scheme, the new programme will be referred to as the Share Appreciation Rights Scheme. The incentive schemes are meant to align the interests of the employees with those of the shareholders, according to the SeedCo board. This follows the logic that company performance will be reflected in the company's share price.

The downside of such an arrangement for shareholders is that sometimes share prices may rise for reasons other than the performance of the company, such as has been the case with the local stock market recently.

Since SeedCo's last reporting date in March 2017, the company's share price has increased by almost 200 percent.

This has been without any justification as there has not been any indication of the company's performance improving significantly during the same period.

At the same meeting, the shareholders also passed a resolution to increase the shares available for the employee incentive scheme by 15 million shares and another to allow for the unexercised share options already granted to employees to be converted to share appreciation rights.
- fingaz
Tags: SeedCo,


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