Friday, January 9, 2009

Wait a second. You mean stock options can be repriced and still be taxed as capital gains?


Below we learn that Teachers’ doesn’t want boards of directors to reprice their employees’ stock options in light of today’s depressed share prices.

Isn’t this rich. Strange that Teachers’ can unilaterally reprice the BCE deal, but they don’t want companies repricing stock options?

That gross hypocrisy aside, stranger still, is that Ottawa allows repriced stock options to be taxed like capital gains. What could be further from the concept of a capital gain than a repriced stock option? I wish I could reprice my investments in such a manner. I know a few people who would like to reprice their income trusts that were hammered in value by Ottawa.

Don't reprice options: Teachers


January 9, 2009

One of Canada's biggest pension funds is urging companies not to reprice stock options or change other types of equity-based compensation to make up for the drubbing their share prices may have taken in the global meltdown of financial markets.

Instead, executives should share the pain with their shareholders, who do not have access to such techniques, the Ontario Teachers' Pension Plan said yesterday as, in advance of annual meeting season, Corporate Canada gears up to begin disclosing how much top company officials were paid for their labours in 2008.

"This is a sort of pre-emptive move on our part," Wayne Kozun, Teachers' senior vice-president of public equities, said in a telephone interview, noting that while some companies have earlier fiscal year-ends - banks and broadcasters, for example - Dec. 31 was the date for most.

"It's to say to boards of directors that, certainly, a lot of executives have done very well in the past few years, and as long as shareholders did well, we don't have a problem with that.

"But shareholders have suffered in the last year, so you shouldn't necessarily make management whole just because there was a bad year."

Teachers also has established itself as a leading advocate of shareholder rights over the past decade and more, and is a founding member of the Canadian Coalition for Good Governance.

Because it is still early in the year, the pension fund has not yet seen any cases where companies have sweetened the pill for their executives - or are proposing to - because of the equity market crash, Mr. Kozun said.

Teachers' representatives have talked about the issue to board members of some of the companies in which it is a shareholder, and the pension fund has been encouraged by what it has heard so far. "Hopefully, they will take into account the feelings of shareholders such as us," he said.

Mr. Kozun added, however, that it is impossible for Teachers to issue a blanket statement that it will necessarily vote its shares against any company proposals to sweeten the terms of its equity compensation because of the market plunge. "There can be very extenuating circumstances," he said.

Toronto-based compensation consultant Ken Hugessen, meanwhile, is recommending that boards of directors should take plenty of time to evaluate how stock-based pay plans and the stocks themselves have performed.

"I think everybody feels we're still in a period of substantial economic and financial uncertainty," he said in a telephone interview.

"These programs were for the most part designed to run for a number of years, and to sort of run out and start 'fixing' them because you had one rough quarter - and at this stage, that's what it is - in our view would be a bit premature."

1 comment:

Dr Mike said...

Now wait just a minute here , this just does not add-up.

I thought capital gains were .....

Oh forgot , this must be the gov`ts idea of a joke , a bit of levity in tough economic times , just the feds tickling our funny bones.

Unfortunately , as usual , the jokes on us.

Dr Mike.