CPA Canada publication outlines alternatives to stock options

Are stock options the most appropriate form of equity-based compensation being used by public companies? Equity-based Alternatives to Stock Options provides an overview of equity-based compensation alternatives for Canadian public companies.

TORONTO, February 19, 2015 – With market attitudes changing, a new publication from Chartered Professional Accountants of Canada (CPA Canada) helps public companies explore alternative forms of equity-based compensation.

According to CPA Canada’s Equity-Based Alternatives to Stock Options, public companies have become increasingly concerned about the disconnect between the stock option expense and the ultimate benefit to employees. In addition, many public companies are trying to use other forms of equity-based compensation in response to market demands.

“Historically, stock options have been used as a compensation tool but a growing number of organizations are limiting their use of stock options and looking for alternative solutions to attract and retain employees,” says Pamela Campagnoni, principal, research, guidance and support, CPA Canada. “We wanted to outline the options and the considerations associated with them.”

The publication discusses a number of equity-based compensation alternatives. For example, using full value equity-based awards is one approach that is linked to the full value of the company shares. Full value equity-based awards include vehicles such as Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”). Also considered are certain full value equity-based structures that allow for a longer award term. An example of the long-term equity awards could be Deferred Share Units (“DSUs”), typically cash settled, which have a longer settlement time period than an RSU.

The publication also features a number of case studies to help companies understand alternative structures currently being used in the marketplace. It summarizes the process of assessing and factors to consider when choosing an effective compensation program that can be easily understood by management teams, the board and shareholders.

Several considerations, such as business characteristics and objectives, need to be addressed when designing a compensation program. “This includes considering the business and strategic implications as well as the reporting, legal and tax consequences,” explains Campagnoni.

About CPA Canada


Canada’s accounting profession is uniting under a new single designation, Chartered Professional Accountant (CPA). The profession’s national body, Chartered Professional Accountants of Canada (CPA Canada), represents and supports more than 190,000 members across the country. CPAs are valued for their financial and tax expertise, strategic thinking, business insight, management skills and leadership. CPA Canada has consolidated the operations of three national accounting bodies: The Canadian Institute of Chartered Accountants, the Certified General Accountants of Canada and The Society of Management Accountants of Canada. CPA Canada conducts research into current and emerging business issues and supports the setting of accounting, auditing and assurance standards for business, not-for-profit organizations and government. It also issues guidance on control and governance, publishes professional literature and develops certification and continuing education programs.

For more information, contact:

Diana Sorace
Media Relations
CPA Canada
(604) 694-6700
dsorace@cpacanada.ca
www.cpacanada.ca

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