Post by
shareholders1 on May 18, 2021 5:18am
"Good Governance is Good Business" - Option Dilution
See below - copied from page 35 of Ontario Teachers Pension Plan - PDF document.
The OTPP discusssion highlights the issue I was trying to identify. The OTPP document seems to indicate that there is a problem with the March 15, 2021 GEO option awards. Perhaps the past ones too.
- 25% limit to one individual - GEO appears offside the Guideline
- 1% burn rate - GEO appears ofside the Guideline
- Higher upto 2% burn rate would seem to be more applicable to start ups, with much less cash compensation etc
- GEO situation appears even worse when you factor in that the CEO owns about 40% already.
- Plus timing of recent option awards seems a bit suspect, given what should have been known internally about expected revenues and contracts
- At minimum, the March 15, 2021 option award to CEO (420k on about 26m share float !!!) needs to be dialed back
" 2.1.1 Issuing
Concentration
We will generally not support plans that authorize allocation of 25% or more of the available equity incentives to any one individual.
Cost
We will support plans whose costs are reasonable in the context of compensation as a whole and relative to industry practice. We consider grant date fair value to be the most appropriate cost to use as it reflects the value directors placed on the executives at the time of the granting of the award.
Dilution and Burn
We will generally support equity incentive plan amendments if the total potential dilution does not exceed 5%, and the burn rate is less than 1% per annum. We will review, on a case-by-case basis, equity incentive plans that provide for total potential dilution exceeding 5% but less than 10%, or where the burn rate exceeds 1% per annum. Where warranted and in limited circumstances, we will consider supporting equity incentive plan amendments with potential dilution rates exceeding 10%, or where the burn rate exceeds 2% per annum. "