Employee share plans are a major part of the remuneration strategies for Hong Kong-listed companies, and this has grown steadily over the past decade. Since 2012, Computershare has been conducting extensive research into the adoption and design of employee share plans in Asia, to uncover and analyse industry trends. Here are some of our recent findings.
As of 2022, 83.6% of Hong Kong-listed companies offered at least one type of employee share plan. In this market, the two most common types of plans are Share Options and Share Awards.
Share options have been the most popular share plan type in Asia for over a decade, and they continue to grow about two times year over year. By comparison, share award schemes grew almost five and a half times year over year, showing the adoption of share awards is increasing at a faster rate.
Here is how companies are using these types of employee share plans as part of their remuneration strategies.
Share Options
With share options, companies give their employees the opportunity to purchase shares in the future at a predetermined price on the grant date. This plan type is popular with smaller, early-stage private or newly listed companies as a way to retain talent. In these types of companies, there is typically a low option price that is expected to increase, leading to greater rewards.
Share options are also used to drive growth as part of the compensation plan for top executives whose compensation is based on performance and closely tied to the company’s financial results.
Share Awards
With share awards, companies grant shares to their employees, usually at no cost, allowing individuals to become shareholders.
Share awards are typically used by companies with a medium to large employee population in highly competitive industries such as Healthcare and Information Technology, as a way to attract and retain talent. These companies have a broader business strategy for the mid- to long-term and want to ensure a stable employee base to reach their goals.
Emerging Employee Share Purchase Plans
In addition to share options and share awards, a third plan type that is still relatively new to Asia is the broad-based or Employee Share Purchase Plan (ESPP).
While many share plans are designed to reward a company’s executive team, broad-based share plans enable the organisation to reward employees at all levels, encouraging an ownership culture. This plan type is gaining popularity among large corporates and fast-growing companies based in Asia and Mainland China, especially those expanding globally to Europe and North America where these plans are common.
Increase in companies offering multiple plans
The different share plan types address varying company objectives, whether attracting, retaining and motivating talent in competitive industries, as part of executive compensation and tied to performance goals, or creating a company culture of employee ownership. That’s why it’s increasingly common for companies to implement more than one share plan type to meet these objectives and address specific employee populations at all career stages. We are now seeing 59% of companies offering multiple plans and expect this trend to grow.
Another benefit of offering multiple plan types is to deal with changing market conditions. As an example, if the stock price decreases making stock options less attractive, the company has the flexibility to alter the reward program to ensure the compensation package remains competitive and can make these changes quickly and accurately.
The use of employee share plans as part of a company’s remuneration package is growing steadily. But just as companies continue to evolve, so too should their reward programs. It is important for organisations to occasionally review their share plans to ensure they are still delivering on the strategic business objectives and meeting the needs of both participants and shareholders, and making any necessary adjustments for continued success.
When did your company last review your employee share plan? If you’re ready to optimise your program, contact us today for the expertise and market best practices that can take your plan to new levels.
Read our recent benchmark report outlining trends in how Hong Kong-listed companies of all sizes and across industries are using employee share plans
