Ownership Matters investigated the listed company practice of buying shares on market to fulfill employee equity schemes and catalogued the cost to companies and the impact on shareholders in the context of minimal, delayed, disclosure by companies.
In the 2012 financial year, more than a third of companies in the S&P/ASX 100 acquired shares on market for use in incentive schemes, with the total cash cost of these buy backs being more than $1.6 billion. These buy backs occurred with minimal disclosure and no shareholder approval despite a substantial proportion of the cash expended being used to purchase equity for senior company executives.
The report discusses key concerns regarding the current lack of disclosure on incentive share acquisitions and calls for regulatory reform. The following questions are often unanswered by companies:
- When are shares acquired?
- How many shares are acquired?
- At what price are shares acquired?
- How many shares are held in ‘treasury’?
- Who acquires shares?
- Who controls shares held in treasury?
The lack of disclosure means that shareholders have limited oversight over what is effectively a form of capital management.
To obtain a copy of our report, please click on the following link:While you were sleeping