ZSE to rationalise share option schemes

THE Zimbabwe Stock Exchange (ZSE) is expected to introduce new measures to rationalise share option schemes amid criticism from shareholders that company executives have since the dollarisation of the economy pocketed millions of dollars from such schemes.

Share option schemes are used as an incentive for employees, giving them the right to buy a certain number of shares in a company at a fixed price in future. At the height of hyperinflation in 2008, shareholders of listed companies crafted enticing incentives in share option schemes for senior management in a bid to ring-fence skilled personnel. But it has since emerged that some shareholders now want the exchange to revisit options approved during recession, arguing that beneficiaries of such schemes would not part with any dime following the redundancy of the local unit.
Employees benefiting from the scheme are eligible to buy the shares after a prescribed period approved by shareholders. When options are exercised, the price is fixed at the date of grant regardless of the prevailing market price.

Market sources told businessdigest this week that the ZSE management committee recently resolved to change share option schemes for public companies to align with the multi-currency payment system after it emerged that managers were raking in hefty packages in a liquidity-short market.
ZSE CEO Emmanuel Munyukwi could not be reached for comment as he was reportedly off duty.
“The ZSE is working on measures that ensure that remuneration (in the form of management share option schemes) is in line with the obtaining economic environment,” said a source privy to the developments.

This “alignment”, the source said, would also see shares issued to management being recognised by the exchange.
Beverages manufacturer and distributor, Delta Corporation, according to sources, is likely to be affected by this new development following shareholders’ approval of a similar scheme.  Delta Corporation CEO Joe Mutizwa could not be reached for comment as he was reportedly engaged in a meeting at the time of enquiry.
The Delta option scheme, put in place two years ago, sought to offer management options to buy shares in the company to attract and retain their services at a subscription value of the now worthless Zimbabwe dollar.

Early this year, businessman Nick van Hoogstraten opposed a share option scheme for Hwange Colliery Ltd saying the authorised shares were insufficient for the scheme. Developed markets have been hit by share option scandals with allegations that CEO and senior executives backdate options. 
US computer-chip maker, Altera, fired a top executive in 2006 after a review of its options granting practice pin-pointed problems that forced the company to restate earnings to reflect $47, 6 million in costs pertaining to options grants.
Other CEO’s have been fired or forced to step down over share options scandal mainly relating to backdating options.  In typical options dating back scandal, the option is dated back to a period where the share price was lower than what it currently is.

Bernard Mpofu

 

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