Delta seeks share option go-ahead

ZSE-LISTED Delta Corporation is seeking shareholders’ approval to ratify a share option scheme granted two years ago after the beverage manufacturer and distributor failed to comply with current ZSE guidelines.

This comes after businessdigest learnt that the local bourse has introduced a raft of measures that would result in share options schemes aligning with the obtaining multi-currency payment system.

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.

It is understood that the decision by the ZSE to review guidelines on share options schemes came after some minority shareholders expressed dismay that the old rules were not sustainable under the prevailing economic conditions. ZSE chief executive Emmanuel Munyukwi said he was tied up when reached for comment.

Delta company secretary Alex Makamure said the company’s scheduled July 28 annual general meeting would, among other things, “ratify the awards of share options granted during the period 2005 to 2009 in terms of 2005 and 2009 share option schemes”.

However, it is understood that some employees could have exceeded the maximum number of share options that can be granted to each participant. The ZSE guidelines outlaw the granting of more than 20% of the exercised options to any option holder. Market speculation says this anomaly has triggered a dispute in the company, a claim Delta denies.

“As stated in the AGM notice to shareholders, Delta is seeking ratification of option awards that were in excess of current guidelines from the ZSE. There was an omission when the 2008 share option scheme was approved by members, in that no individual limits were set, and the proposed resolution is intended to remedy that oversight,” said Makamure in a written response.

He could not reveal how many shares were granted to the executives, saying: “Zimbabwe legislation and ZSE regulations do not provide for the publication of details of individual allocations to members of staff.”

Delta shareholders, according to Makamure, in 2008 approved the allotment of 20 million shares to a non managerial Employee Share Empowerment Scheme from which each of the 3 500 permanent employees were to receive 5 000 Delta shares for free when the scheme matures in 2013. A notice issued to shareholders when the scheme was granted shows that 75 million ordinary shares were allocated to this scheme. The resolution, he added, is meant to deal with the need to meet guidelines proposed by the ZSE which he said cannot be applied retrospectively.

“These schemes did not set specific limits of grants to participants and no issues were raised by the Zimbabwe Stock Exchange when the schemes were lodged with them at the relevant times. They have, however, now proposed guidelines and have asked that shareholders ratify any gap between current guidelines and past grants from the closed 2005 and 2008 schemes as it is not possible to apply the suggested limits retrospectively.”

On payment of income tax for the schemes granted during the Zimbabwe dollar era, the Delta company secretary said the company assesses PAYE on the date the option is exercised.

“This is based on the share price ruling on the ZSE. The employee pays the tax hence they normally dispose of some of their shares to raise the tax. The current top tax rate of 36.05% applies to this benefit,” Makamure said.

He added that “major” Delta shareholders, SABMiller and Old Mutual, who are represented both on the board and on the remuneration committee, were fully informed on these matters.

Developed markets have been hit by share option scandals with allegations that CEOs 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.

Meanwhile, Delta’s share price this week recorded a slight gain after closing the past week on a low. The stock yesterday opened at US48,02 cents.

The mainstream industrial index on Wednesday marginally gained 0, 9 basis points  to close at 127, 46 points despite losses in blue chips.   Econet dropped 25 cents to close at 453 cents with Innscor and Old Mutual dropping three cents each to close at 54 cents and 135 cents. TA shed two cents to close at 30 cents and CBZ slipped 0, 50 cents to close at 14, 50 cents. The losses were countered by gains in Natfoods which rose five cents to trade at 90 cents and CAFCA went up two cents to close at 14 cents. ZBFH was up 0, 50 cents at 7, 50 cents with Turnall 0, 40 cents higher at three cents.

On the other hand, the mining index retreated by over six basis points from last week’s 149, 36 points. Mining giant RioZim gained nine cents to close Wednesday’s trades at 249 cents. Hwange shed 21 cents while Falgold and Bindura remained unchanged.

The market has been on a freefall since January after government gazetted indigenisation and economic empowerment regulations compelling foreigners to “dispose” of 51% shareholding in businesses valued at US$500 000 and above to “indigenous” Zimbabweans.

 

Bernard Mpofu

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