Japanese companies warm up to employee stock incentives
20/09/2023 24:01
By Makiko Yamazaki and Ritsuko Shimizu
TOKYO, Sept 20 (Reuters) - Airline operator ANA Holdings
9202.T plans to offer around $60 million worth of shares to
thousands of employees, the latest Japanese company to use
employee share incentives as a tool to retain talent and comply
with a request by the regulator to pay more attention to share
price performance.
ANA will offer 100 shares worth about $20 each to about 70%
of nearly 45,000 employees in November, following in the
footsteps of other major Japanese firms such as Omron 6645.T
and Sony Group 6758.T .
The employee share incentive plans coincide with one of the
most severe labour shortages Japan has seen in years, and as the
Tokyo Stock Exchange urges listed firms to become "more
conscious" of their share prices due to concerns that far too
many companies are trading below their book value.
In the last five years, the number of Japanese companies
offering equity-based compensation to employees doubled to 966,
data from Nomura Securities shows, representing a quarter of the
some 3,900 listed firms.
"We are seeing a surge in inquires now," Motomi Hashimoto,
principal researcher at Nomura's stock incentive solution
department, told Reuters. Stock incentives are seen positively
by the market "as higher stock prices directly boost such
incentives," she said.
By having more employees as shareholders, executives hope
staff will be more committed to their company's effectiveness
and earnings, and therefore its stock performance.
Raising corporate value is key for investors in Japan, where
so many stocks are chronically undervalued that the Tokyo Stock
Exchange made a rare call in March for firms to disclose
long-term plans to improve capital efficiency.
At Omron, stock incentives are meant to "align management,
employees and shareholders", said Hitoshi Tanimura, senior
general manager at the human resources department.
Sony, which introduced stock incentives years ago for some
management levels, recently changed its framework to make the
incentives more attractive, a spokesperson said.
At ANA, employees must hold on to their shares for three
years before they can sell or transfer them, said Shintaro
Takano, a general administration executive.
"When the pandemic hit our earnings, many employees in their
thirties and forties left," he said. "The stock incentives are
aimed at beefing up engagement with employees and promoting
their interest in raising corporate value."
Stock-based compensation, mainly for managers, became
popular after former Prime Minister Shinzo Abe introduced
corporate governance reforms nearly 10 years ago that made such
incentives more tax deductible.
Today, employee stock incentives are also a way for
companies to replace cross-shareholdings, a common practice
where companies take stakes in partners to cement relationships
and avoid activist investors.
Cross-shareholdings have drawn criticism from international
investors and companies are under pressure from the regulator to
unwind them as soon as possible.
Despite its increasing popularity, just a quarter of top 100
Japanese companies have employee stock incentives compared to
more than 80% in the United States or Germany, data by
consulting firm Human Resources Governance Leaders shows.
Experts say labour laws that require employers pay wages in
actual currency have hindered the spread of employee share
incentives, because stocks can only be added onto wages, instead
of replacing part of them.
Shinji Ishikawa, senior chief manager at Mitsubishi UFJ
Trust and Banking's human resources solution services division,
said more legal flexibility would accelerate the adoption of
stock incentives.
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; editing by
Miral Fahmy)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))