Fisher & Paykel Healthcare maintains a variety of short-term and long-term remuneration plans designed to attract, motivate and retain high quality employees who will enable the company to achieve its short and long term objectives. The company's remuneration policy includes providing variable remuneration plans which allow executives to share in the long term success of the company. The company’s share option and performance share rights plans are intended to encourage the retention of senior management and increase the commonality between the interests of management and shareholders.
The remuneration packages of senior management consist of a mixture of a base remuneration package, the company-wide profit sharing bonus, a variable remuneration component based on relevant performance measures, participation in the company's employee share purchase plan, share options plan and performance share rights plan. A summary of the company's share options plan, performance share rights plan, employee share rights plan, employee share purchase plans and employee stock purchase plan is set out below.
Fisher & Paykel Healthcare 2019 Share Option Plan
Options are granted to selected employees pursuant to the share option plan. One option gives the employee the right to subscribe for one ordinary share in the company subject to meeting the vesting conditions. No amount is payable for the grant of options.
Options vest if during the period from the date of grant of an option to the third, fourth, or fifth anniversary of the grant date the Company’s share price on the NZX has exceeded the “escalated price” and as long as the employee remains in the service of the Group.
The exercise price of options will be the volume weighted average price for a share on the NZX for the 5 business days prior to the grant date for the options.
The escalated price is determined as follows:
As at each anniversary of the grant date up to and including the fifth anniversary of the grant date for an option, a “base price” will be calculated by:
- increasing the last calculated base price (which as at the grant date will be the exercise price of the option) by a percentage amount determined by the Board to represent the company’s cost of capital; and
- reducing the resulting figure by the amount of any dividend paid by the company in respect of a share in the 12 month period immediately preceding that anniversary.
The Board has a discretion to adjust the terms of the options if a takeover or similar transaction occurs in respect of the Company.
Fisher & Paykel Healthcare 2019 Performance Share Rights Plan
Performance share rights (PSRs) are granted to selected employees pursuant to the performance share rights plan. One share right gives the employee the potential to exercise a share right for an ordinary share in the company at no cost. Share rights may become exercisable if the company’s gross total shareholder return (TSR) performance exceeds the performance of the Dow Jones US Select Medical Equipment Total Return Index (DJSMDQT) in New Zealand dollars over the same period. If the company’s TSR performance exceeds that of the DJSMDQT at any of the third, fourth or fifth anniversary of the grant date of the PSRs, some or all of the PSRs may become exercisable as long as the employee remains in the service of the Group, depending on the extent to which the TSR has exceeded the DJSMDQT.
All unexercised PSRs expire at the end of the exercise period following the fifth anniversary of the grant date.
On leaving employment due to death, serious illness, accident, permanent disablement, or redundancy the employee or, if applicable, the employee’s executors may be able to exercise the PSRs. On a termination of employment for any other reason all outstanding PSRs will lapse.
The Board has a discretion to adjust the terms of the PSRs if a takeover or similar transaction occurs in respect of the Company.
Fisher & Paykel Healthcare Employee Share Rights Plan
Employee share rights (ESRs) are granted to selected employees pursuant to the Employee Share Rights Plan. Each ESR granted under the Employee Share Rights Plan entitles the employee to be issued or transferred one ordinary share in the Company, at no cost. ESRs automatically vest after three years, provided the employee remains in the service of the Group. All ESRs will vest at this point and shares will then be transferred to the employee. There is no cost to the employee when the ESRs vest.
Unless otherwise determined by the Board, ESRs will lapse on the first to occur of the Company receiving a written notice from an employee surrendering their ESRs, the employee’s leaving date if they cease to be employed by the Company or any of its subsidiaries, or the date of cancellation of the ESRs due to a Change of Control Transaction. A Change of Control Transaction may be either a full or partial takeover offer, any other transaction whereby a person becomes the controller of a majority of the Company’s voting securities, sale to a third party of all or a majority of the business and assets, or any other analogous merger, reconstruction or transaction.
The Board has a discretion to adjust the terms of the ESRs if a takeover or similar transaction occurs in respect of the Company.
New Zealand and Australian Employee Share Purchase Plans
Shares are issued at a discount of up to 50% of market price, on terms permitted by the plans in accordance with the relevant provisions of the New Zealand Income Tax Act 2007 and the Australian Income Tax Assessment Act 1936 respectively, with no interest being charged on the loans. All New Zealand and Australian full time employees and some part-time employees are eligible to participate after a qualifying period of employment.
The restrictive period between grant and vesting date is 3 years. Dividends paid during the restrictive period on shares allocated to employees under the plans are paid to the employees. Voting rights on the shares are exercisable by the Trustees under the plans.
Once vested an employee participant may elect to transfer the shares into their own name, after which the shares are freely transferable. All shares are allocated to employees at the time of issue, on the condition that should they leave employment before the restrictive period ends, their shares will be repurchased by the Trustees at the lesser of market price and the price at which the shares were originally allocated to the employee, subject to repayment of the original loan. Different provisions apply if an employee leaves employment by reason of death, accident, sickness, redundancy, or retirement at normal retiring age.
Any such repurchased shares are held by the Trustees for allocation to future plans. Trustees of the Employee Share Purchase plans are appointed by the company.
North American Employee Stock Purchase Plan
Shares are issued at a discount of 15% being the lower of the market price at the date of issue or the market price at the beginning of the annual offering period in accordance with section 423 of the US Internal Revenue Code, as amended. All North American employees working more than 20 hours per week are eligible after a qualifying period. Employees make regular payroll contributions to the plan with shares being issued to employees quarterly to the value of their accumulated contributions to the plan.
All shares are allocated to employees at the time of issue and vest immediately.
Information updated on 23 January 2020.