executive share option scheme


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executive share option scheme

an arrangement which involves the periodic grant of SHARES in a company to the company's executive directors as an incentive for them to improve the financial performance of the company and align their interests more closely with those of the company's SHAREHOLDERS. Options to buy shares are granted at a specified ‘exercise’ price which is normally the market price of the company's shares at the date of grant. The exercise of options typically can only occur between three and ten years after the date of grant. Most options can be exercised (that is ‘cashed-in’) only provided that certain pre-determined financial performance ‘targets’ are achieved over a specified time period, usually three years. Typically, option schemes require the company's earnings per share (profit after tax divided by the number of shares) to grow at a rate greater than the increase in the RETAIL PRICE INDEX over the same period or growth in total shareholder return (increase in share price with dividends reinvested) to exceed that of companies comprising some SHARE PRICE INDEX, such as the FTSE-100 share index. Compare LONG-TERM INCENTIVE PLAN. See PRINCIPAL-AGENT THEORY, BUSINESS OBJECTIVES, CORPORATE GOVERNANCE, EMPLOYEE SHARE OWNERSHIP PLAN.

executive share option scheme

an arrangement that involves the periodic grant of SHARES in a company to the company's executive directors as an incentive for them to improve the financial performance of the company and align their interests more closely with those of the company's SHAREHOLDERS. Options to buy shares are granted at a specified ‘exercise’ price, which is normally the market price of the company's shares at the date of grant. Most options can be exercised (i.e. ‘cashed in’) only provided that certain predetermined financial performance ‘targets’ are achieved over a specified time period, usually three years. Typically, option schemes require the company's earnings per share (profit after tax divided by the number of shares) to grow at a rate greater than the increase in the RETAIL PRICE INDEX over the same period or growth in total shareholder return (increase in share price with dividends reinvested) to exceed that of companies comprising some SHARE PRICE INDEX, such as the FTSE-100 share index.

For example, in the case of Legal and General (2004), the insurance company share options become exercisable if the growth in the company's total shareholder return (TSR) is greater than the average TSR growth of companies comprising the FTSE-100 share index over three years. For Barrett (2004), the house-building company, share options become exercisable if the growth in the company's earnings per share is greater than the increase in the RETAIL PRICE INDEX by at least 9% over three years. Compare LONG-TERM INCENTIVE PLAN. See PRINCIPAL-AGENT THEORY, FIRM OBJECTIVES, CORPORATE GOVERNANCE.

References in periodicals archive ?
On a fully diluted basis, taking into account the 2,052,840 additional shares issued to the executive share option scheme as well as the convertible subordinated loan, earnings per share were SEK 0.
If the Offer becomes or is declared unconditional in all respects, appropriate proposals will be made to participants in the topjobs Executive Share Option Scheme who have not exercised their respective rights and options.
issued or agreed to issue or authorised or proposed the issue of additional shares of any class, or securities or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save as between topjobs and wholly-owned subsidiaries of topjobs and save for (A) any issue of options pursuant to the topjobs Executive Share Scheme; (B) the issue of topjobs Securities pursuant to the exercise of rights to subscribe for topjobs Securities pursuant to the exercise of options granted under the topjobs Executive Share Option Scheme or (C) the issue of topjobs Securities pursuant to the exercise of rights to subscribe for topjobs Securities in accordance with the terms of issue of any topjobs Warrant);
NYSE: AIB; AIBPR; FMBPR) has issued 416,500 new ordinary shares of 25p each in connection with its Executive Share Option Scheme.
NYSE: AIB; AIBPR; FMBPR) has issued 60,000 new ordinary shares of 25p each in connection with its Executive Share Option Scheme.
has issued 236,368 new ordinary shares of 25p each in connection with its Executive Share Option Scheme.
NYSE: AIB; AIBPR; FMBPR) has issued 51,300 new ordinary shares of 25p each in connection with its Executive Share Option Scheme.
Existing schemes such as the SAYE approved profit sharing and executive share option schemes will still be available, but tax breaks on the new all employee share ownership plan (Aesop) and the enterprise management incentive scheme (EMI) should guarantee the interest of all eligible businesses.
According to Greenbury, executive share option schemes should be phased over a period of time rather than granted in large blocks.

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