New Report on Potential Impact of Equity Compensation in Australia
Executive Director
On July 14, Employee Ownership Australia and New Zealand issued a report titled Employee Share Schemes - Their Importance to the Economy (PDF), which estimates the impact of proposed reforms to equity compensation legislation in Australia.
The report estimates that the proposed reform would add $1.3 billion (US) to Australian domestic product over 10 years, based on the assumptions that (1) reform would result in 5% more companies adding stock plans and (2) the average increase in share price per company would be 10%. The first assumption is that reforms would reverse part of the decrease in such plans following 2009 legislative changes that discouraged stock plans. The second assumption is based on a report by FieldFisherWaterhouse on the UK Employee Ownership Index, composed of public companies in which 10% of shares are held by employees. Such companies outperform the UK's broader market by 10%.
The proposed reforms would generally reverse the 2009 change in the law, which was intended to curb excessive executive compensation. Among other things, the 2009 changes made most stock options taxable on vesting rather than exercise and limited the amount of allowable salary deferral for stock plans. The impact was that 30% of plans were suspended for two years, and many of those plans remain suspended. The average annual deferral per employee in "salary sacrifice" plans declined from $8,400 to $3,300 (US).