DURBAN – LIBERTY Holdings has asked its remuneration committee to review its executives’ long-term incentive (LTI) schemes following the Covid-19 outbreak, which impacted its business.
Liberty said yesterday that the scheme awarded to nearly 40 senior managers in March would be more effective if implemented under the equity growth scheme (EGS), through a contractual process of voluntary cancellation and acceptance.
The group said the review was necessitated by the Covid-19 outbreak.
“The Covid-19 pandemic and associated economic crisis has radically changed the environment in which we work, the way we work, and the way we serve our clients,” Liberty said. “In this context, Liberty faces an unprecedented set of circumstances in which the interests of clients, shareholders and all other stakeholders need to be protected, and promoted as best as possible.”
Liberty’s market capitalisation has shrunk 35 percent since the Covid19 outbreak in March. In the six months to the end of June, the group reported that it had swung into a loss of R2.17 billion, hurt by a R3bn reserve fund set aside to deal with the pandemic’s effects on its operations.
The group said the incentive performance reward plan (PRP) scheme awarded to the executives three weeks before the commencement of the pandemic lockdowns in South Africa provided very little alignment with the overall interests of all stakeholders.
“The financial conditions attached to the PRP scheme simply did not contemplate the severity of the effects of the pandemic,” the group said, adding that the executive leadership team have a critical role to play in providing the energy and leadership for Liberty to cope with the current crisis.
The group said its two executive directors have already converted to the special EGS awards.
Chief executive David Munro, who received a PRP award to the value of R13.5 million, has, through a process of voluntary cancellation and acceptance, become a special EGS award to the same value.
“The March 2020 LTI award for Yuresh Maharaj, the chief financial officer, which was a PRP award to the value of R6.5m, has through a process of voluntary cancellation and acceptance become a special EGS award to the same value,” the group said.
The group’s PRP is aimed at a small group of executives and senior management who are able to significantly influence its long-term performance and vesting is conditional upon meeting performance targets and the vesting period is four years with two instalments delivered in years four and five.
It said the EGS was aimed at executives and senior management who have been identified as critical to business sustainability and capitalising on growth opportunities.
The group said participants are awarded share appreciation rights linked to the Liberty share price at the grant date of the award and awards are discretionary and subject to Remco approval.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said: “I suppose the incentives were not providing much incentive at the share price on March 1. It is a tough pill for shareholders to swallow.”
Liberty shares closed 5.93 percent higher at R60.59 on the JSE yesterday.