Free shares favoured over options

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MANY companies are rewarding managers with free shares in response to growing public concern over the use of options, says New Bridge Street Consultants, the employee benefits specialist, writes Roger Trapp.

According to the firm's latest Executive Briefing, restricted share schemes such as that recently introduced by Reuters - which allocate free shares to managers once performance targets have been met - are increasingly popular. This is because option schemes, which give holders the right to buy shares at a certain price, have been subject to great volatility recently.

'Managers can either make a lot of money or nothing. Options are becoming something of a lottery,' said Carol Arrowsmith, managing director.

This is leading firms to investigate other approaches. For instance, executives at Prudential, the insurer, use part of their bonus to buy shares in the company. If they keep them, they receive additional shares once the investment period ends.

The changes, which often link the award of shares to a company's performance in relation to its peers, are also designed to make sure companies are paying for results.

Ms Arrowsmith said they might produce greater benefits than option schemes, as the managers received the whole value of the shares rather than the growth in value.