The intention behind compensating managerial and other staff by long-term incentives such as stock option plans is to bring their interests into line with those of shareholders, resulting in sustainable growth in the company’s stock price. Where such plans are put to the Stockholders’ Meeting for approval, stockholders should make sure they are compatible with the long-term interests of the company. The Codes of Good Practice in corporate governance take several factors into account, including who the beneficiaries are, the proportion of capital set aside for the purpose, the exercise price and the performance required for exercising the stock options.
Thus ethos recently voted in favor of a company-wide plan targeting employees in British Telecom’s mobile telephony company, and a bonus plan for executives at Oracle, since both plans met the Code of Good Practice requirements. On the other hand, ethos voted against plans submitted by Proctor & Gamble and Automatic Data Processing, which were judged to be excessive. It also rejected the plan for executives of BT’s mobile telephony company, since no performance requirements were attached and some of the individual allocations provided were excessive. For the record, 21% of votes cast were against this plan.
