Macquarie to Provide More Tax-effective Ordinary Shares

Submitted by Jim Thesiger on 18 December, 2009 - 06:00

Worldwide diversified financial service provider Macquarie (MQG) has defended its decision to put a halt on granting options to the most senior bankers of the company. As a part of the new package, these bankers will be provided with more tax-effective ordinary shares. The bank secured approval regarding the proposal from its shareholders in the general meeting on Thursday which was held in Sydney although the board was criticised by some as it altered the options component of the salaries of its executive committee. According to the new proposal, ordinary Macquarie shares held in escrow for three to seven years will replace the options. The new policy will include performance hurdles as well.

The company came up with the new plan following the Government announcement in the May budget which stated that instead of during the time of vesting, options will be taxed when they are granted- something that Macquarie opposed as it believes the change would shift the tax burden unjustly.

According to the chief financial officer of Macquarie Greg Ward, the Australian corporates were preferring the ordinary equities, moving away from the options. Mr. Ward also added that an employee would have to pay taxes based on the difference between the share price at time of vesting and the exercise price, in terms of changes. Macquarie chairman David Clarke said that performance hurdles through which Macquarie's profit and growth was rated against a number of global competitors will be incorporated in the system. The company has plans to use its growth of earnings per share (EPS) as a benchmark to decide the number of shares which will be granted annually. A larger portion of the pay packet for chief executive Nicholas Moore will be invested in the direct Macquarie shares under the bank’s shakeup in a bid to bind remuneration to its performance more closely.

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