Bruce Whitfield
Metcash shareholders have taken an unusual step of rejecting the company’s efforts to lower the price on staff share options.
Sixty-eight per cent of shareholders voted in favour of a special resolution that would have effectively meant the cost of the options would have been lowered from 550c to 130c. But the resolution failed to go through, as it required the support of 75% of shareholders.
Metcash had hoped a sufficient number of shareholders would approve a plan to repurchase 55-million Metro ordinary shares from the 1999 Metro Share Incentive Trust.
The company announced in March that it intended bringing in the changes, as it needed to offer new incentives to all employees including executive directors. It said at the time that the ruling share price meant the scheme no longer served its origi-nal purpose, and had become a major dis-incentive to employees.
Because the share option scheme is weighted in favour of senior executives, it effectively ties managers like chief executive officer Carlos Dos Santos to the company until the share price recovers.
Otherwise he would be obliged to pay in the difference between the current share price and the 550c value placed on the shares in the incentive trust, if he wanted to bail out of the firm.
Rand Merchant Bank chief investment strategist Wayne McCurrie, whose company owns about 12% of the Metcash shares, says shareholders have sent a clear message to staff. If they are going to benefit from the shares held in the trust, they will have to get the share price back to 550c before they are able to make gains from the share scheme.
“Why should the shareholders bail out the employees of a company when obviously they have not been successful, measuring it in terms of the share price?” asks McCurrie.
McCurrie says it is not unusual for companies to bail out share schemes, and says it has happened numerous times in recent years. He says however that it is extremely unusual to have shareholders voting against the move.