BusinessCompany NewsShare options standard to alter pay packages

Share options standard to alter pay packages

The design of executive remuneration packages could alter significantly following the introduction of new accounting standards on share options.

Link: Share option standard faces delay (

Consulting firm Watson Wyatt has warned that the proposals for the accounting of share-based payments, which will see shares treated similarly to other forms of payment in the profit and loss accounts, contain two major anomalies that could have unexpected consequences.

The first anomaly concerns the performance conditions that must be met before an executive is entitled to a share package. Both earnings per share and total shareholder return (TSR) are likely to be heavily affected by the proposals, increasing volatility in EPS and causing a lower profit and loss charge in the first year under a TSR test.

Another concern is the different way options are treated depending on whether the option plans are paid out in shares or cash, with significant differences appearing in future years’ accounts.

‘It will be extremely unhelpful if these anomalies persist in the final version of the new accounting standard,’ said Watson Wyatt partner John Ball.

‘The design of performance conditions for executive share plans is a crucial area. Obtaining real alignment between executive pay and company performance is something that company remuneration committees should be paying greater attention to. It is vital that in doing so they take into account the impact of the new accounting rules.’

Related Articles

M&S business rate liabilities based on £570m rateable value

Company News M&S business rate liabilities based on £570m rateable value

4m Emma Smith, Managing Editor
BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

8m Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

1y Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

1y Alia Shoaib, Reporter
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

1y Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

1y Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

1y Emma Smith, Managing Editor
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

1y Emma Smith, Managing Editor