Long-term Incentive as the Engine to Drive Partnership
Pretium study finds long-term incentive segmentation is the new normal of a partnership model to drive exponential growth.
HONG KONG, October 6, 2015 – Chinese companies are quicker to use long-term incentives as the engine to drive partnership according to independent management consulting firm, Pretium Partners Asia Limited ("Pretium").
Pretium Long-Term Incentive Practices Study (2015) shows long-term incentives (LTI) penetration in China has substantially increased whereas Hong Kong companies remain largely unchanged. With the relaxation of regulatory requirements for share based incentives in China and increasing popularity of the partnership model spreading from the internet companies, more Chinese companies plan to strengthen LTI plans to increase employees’ ownership and sense of participation.
The study examined the features of 72 long-term incentive plans in 61 companies in Hong Kong and China with a total of over 5 million employees and HK$12,000 billion revenue. This included additional long-term incentive plans and deferred bonus plans across 8 major industries.
In Hong Kong, LTI was adopted a decade ago and it was evolving gradually with share options still dominated most of the LTI plans. In contrast, most of the Chinese companies had only come to realize the advantages of such plan recently. “LTI has got an unprecedented attention in China and Hong Kong which created a rippling effect from IT firms spreading across different industries. As a result, more companies introduced or strengthened LTI plans to reinforce alignment of interest between the company and the executives” said May Poon, Managing Partner at Pretium.
Among the benchmarked companies, information technology (IT) firms, fast moving consumer goods (FMCG) companies and the casinos are the frontrunners in using LTI as the engine to drive partnership. These industries are rather labour intensive and facing keen talent competition, so LTI would help stabilize the top team, promote ownership and sense of participation. “Segmentation and customization is the new normal to prevent unnecessary share dilution and target at the different retention drivers of the awardees” said Ms. Poon.
More companies came to realize a simple time-based share option plan was insufficient in terms of quantum and features to promote the partnership mindset. “LTI as a key driver for the partnership model is characterized by meaningful ownership and emphasis on alignment of interest so that awardees, who become a significant owner of the company, will make sound judgement to drive their own business” said Ms Poon. Additional long-term incentives were as such introduced among a small team of senior executives to enable substantial ownership among the top team while avoiding unnecessary dilution. “Most of these additional plans were in form of share based incentives with performance conditions as they could serve multiple purposes of a partnership model as well as retention” Ms. Poon added.
About Pretium Long-Term Incentive Practices Report (2015)
Pretium Long-Term Incentive Practices Study (2015) examined the features of 72 long-term incentive plans in 61 companies across different industries in Hong Kong (including Macau) and China. These included Conglomerates, Consumer Goods, Gaming, Energy, Financial Services, IT, Properties and Construction and Utilities companies. The Report covers additional long-term incentive plans and mandatory deferred bonus plans.
About Pretium Partners Asia Limited
Pretium Partners Asia Limited ("Pretium") is an independent management consulting firm that helps accelerate clients' growth and increase profitability through unique spectrum of management consulting services which includes incentive plan review and design, organization transformation, benchmarking, performance management, IPO corporate governance as well as mergers and acquisitions integration.
SOURCE: Pretium Partners Asia Limited
Pretium study finds long-term incentive segmentation is the new normal of a partnership model to drive exponential growth.
HONG KONG, October 6, 2015 – Chinese companies are quicker to use long-term incentives as the engine to drive partnership according to independent management consulting firm, Pretium Partners Asia Limited ("Pretium").
Pretium Long-Term Incentive Practices Study (2015) shows long-term incentives (LTI) penetration in China has substantially increased whereas Hong Kong companies remain largely unchanged. With the relaxation of regulatory requirements for share based incentives in China and increasing popularity of the partnership model spreading from the internet companies, more Chinese companies plan to strengthen LTI plans to increase employees’ ownership and sense of participation.
The study examined the features of 72 long-term incentive plans in 61 companies in Hong Kong and China with a total of over 5 million employees and HK$12,000 billion revenue. This included additional long-term incentive plans and deferred bonus plans across 8 major industries.
In Hong Kong, LTI was adopted a decade ago and it was evolving gradually with share options still dominated most of the LTI plans. In contrast, most of the Chinese companies had only come to realize the advantages of such plan recently. “LTI has got an unprecedented attention in China and Hong Kong which created a rippling effect from IT firms spreading across different industries. As a result, more companies introduced or strengthened LTI plans to reinforce alignment of interest between the company and the executives” said May Poon, Managing Partner at Pretium.
Among the benchmarked companies, information technology (IT) firms, fast moving consumer goods (FMCG) companies and the casinos are the frontrunners in using LTI as the engine to drive partnership. These industries are rather labour intensive and facing keen talent competition, so LTI would help stabilize the top team, promote ownership and sense of participation. “Segmentation and customization is the new normal to prevent unnecessary share dilution and target at the different retention drivers of the awardees” said Ms. Poon.
More companies came to realize a simple time-based share option plan was insufficient in terms of quantum and features to promote the partnership mindset. “LTI as a key driver for the partnership model is characterized by meaningful ownership and emphasis on alignment of interest so that awardees, who become a significant owner of the company, will make sound judgement to drive their own business” said Ms Poon. Additional long-term incentives were as such introduced among a small team of senior executives to enable substantial ownership among the top team while avoiding unnecessary dilution. “Most of these additional plans were in form of share based incentives with performance conditions as they could serve multiple purposes of a partnership model as well as retention” Ms. Poon added.
About Pretium Long-Term Incentive Practices Report (2015)
Pretium Long-Term Incentive Practices Study (2015) examined the features of 72 long-term incentive plans in 61 companies across different industries in Hong Kong (including Macau) and China. These included Conglomerates, Consumer Goods, Gaming, Energy, Financial Services, IT, Properties and Construction and Utilities companies. The Report covers additional long-term incentive plans and mandatory deferred bonus plans.
About Pretium Partners Asia Limited
Pretium Partners Asia Limited ("Pretium") is an independent management consulting firm that helps accelerate clients' growth and increase profitability through unique spectrum of management consulting services which includes incentive plan review and design, organization transformation, benchmarking, performance management, IPO corporate governance as well as mergers and acquisitions integration.
SOURCE: Pretium Partners Asia Limited