SECTION 5: EQUITY-BASED REMUNERATION

Section 5: Equity-Based Remuneration | 119 5.1 Introduction 5.1.1 Equity-based remuneration is usually only found in the long- term incentive (LTI) component of a remuneration contract. This is because LTIs are aligned with longer-term shareholder value creation and the long-term success of the company 1 . Managing equity-based remuneration involves a higher level of complexity and a stricter regulatory environment. In particular, an RC needs to: • Understand the role of equity plans within the overall remuneration framework. • Understand the different types of equity-based remuneration plans in order to determine which best meets its company’s needs. • Agree to a particular plan that will meet the specific needs of the company and help drive long-term business objectives. • Have at least a conceptual understanding of the way in which LTIs are valued and accounted for. • Be aware of the regulatory controls that impact the implementation of equity-based plans and their ongoing compliance. • Put in place a process for managing regular grants. • Decide which administrative matters are delegated to management. • Understand how to effectively communicate the objectives and impact of equity plans to all stakeholders. 5.1.2 Though an RC should have a broad understanding of the issues involved, it cannot be expected to have detailed knowledge as LTIs can be both complex and esoteric. The RC may rely on various advisers including the company secretary, legal counsel, auditors, tax specialists and remuneration consultants. The company should disclose the engagement of any remuneration consultants and their independence 2 . 1 Provision 7.1 of the Code. 2 Provision 6.4 of the Code.