Of the 43 companies that are listed on the Jamaica Stock Exchange, only 13, or fewer than a third have ever bothered to put in place some form of share option plan that would facilitate ownership in the company by either senior executives or staff.

The schemes in place at the publicly traded firms vary significantly in their generosity to management and staff, complexity, and time horizon over which the intended benefits can materialise.

RBTT Bank

Those with schemes are:
. Dehring Bunting & Golding;
. Scotibank Jamaica;
. GraceKennedy;
. Courts Jamaica;
. Pan Caribbean;
. Capital & Credit;
. Life of Jamaica;
. Jamaica Money Market Brokers;
. Pan Jamaican Group;
. Mayberry Investments;
. Guardian Holdings;
. RBTT Bank; and
. First Caribbean International Bank Jamaica.

Importantly, several senior managers at companies that provide option plans have either not participated at all, or done so minimally - reflecting in part, the fact that the sluggishness of stocks over the past few years has knocked much of the short and medium benefits from options.

This however, has not been the case at the investment bank, Dehring Bunting & Golding (DB&G). Here, the three executive directors benefit from what is by far the most generous share plan among all listed companies.

While Jamaica Money Market Brokers appears to be among the kindest to staff, Mayberry Investments has set aside shares for employees, but the ownership scheme is yet to be activated.
In the case of Pan Jamaican Investments and its subsidiary, First Jamaica Investments (FJI), stock option plans were in place up to the end of 2004, but those options were all exercised by December 31, 2004, and are yet to be re-introduced.

DB&G's scheme became effective in 2000, and during the first five years, 40.8 million shares representing 13.5 per cent of the company's fully issued and paid up stock were allocated to the three executive directors: Peter Bunting, the executive chairman, Mark Golding, corporate secretary, and Garry Sinclair, the chief operating officer.

This year, DB&G decided to broaden the number of executives who will benefit under this generous share plan to 13, Bunting told the Business Observer yesterday. They will therefore, share 6.1 million shares - the allocation reflecting the company's 2005/06 financial performance. The shares will be issued during the 2006/07 financial year that ends on March 31, 2007.
"The beneficiaries have been expanded by an additional 10 team members to total 13," said Bunting.

In May last year, the board of DB&G established a remuneration committee. Three months later - in August - the committee recommended that the annual stock compensation be capped below its present level - with the cap defined by the dilution level of the shares issued to the executives.

During the 2004/05 financial year, the shares issued to the DB&G executives under the plan diluted the holdings of the other shareholders in the company by 4.2 per cent. With the new policy, the dilution of any future shares issued to the executives cannot exceed two per cent.

Another recommendation of the committee which has been translated into policy, is that the return on average equity posted by DB&G in any year must exceed the weighted average treasury bill yield by at least 10 percentage points for the executives to get any share.

Given the current average treasury bill yield of just below 13 per cent, DB&G would have to return at least 23 per cent on average shareholder equity for shares to be allocated to the executives.
For the year to March 31, 2006, DB&G made net profit of $880 million. Equity at balance sheet date was $3.56 billion, an increase over the $2.1 billion the year earlier. Return on average equity was therefore 38.6 per cent, a comfortable margin over the threshold set by the committee.

Bunting told the Business Observer that DB&G's performance for the year to March 31, 2006 - given the 10 per cent profit growth, and J$45 million in dividend, made his company among the strongest performers of all listed firms.

GRACE

Unlike DB&G where the executives benefit from the scheme irrespective of the share price, the formula used at GraceKennedy makes it difficult for the executives who participate in the scheme to profit if the price of the Grace stock does not rise.

Grace's current stock option plan was established in 2002, when eight million shares were set aside for sale to directors - 7.17 million for executive directors, and 720,000 for non-executives.
The options were granted at a subscription price of $27.34, the mid-market price of the company's shares on the JSE at the grant date in July 2002.

Each director was allowed to purchase up to 20 per cent of his shares, one year after they were allocated, and 20 per cent on each anniversary thereafter. It would therefore take five years for them to be fully bought.

The beneficiaries:
. Douglas Orane, executive chairman;
. Don Wehby, group CFO;
. Erwin Burton, COO - food trading;
. John Mahfood, COO - retail and trading;
. Brian Goldson, COO - information services.
Shares not exercised in any one year would roll over, with the option expiring at the end of 10 years - the total life of the scheme.

In 2004, executive directors exercised 1.55 million options, and non-executives 144,000, with the remainder of the 2.4 million shares going to staff. The share price reached $97.16 by the exercise date in July of that year.

In 2003, Grace set aside an additional 10 million shares for sale to senior managers. With this block, the senior managers are entitled to one-third of their allocation on each anniversary date. They have six years to take up the shares. In 2004, 662,000 shares were exercised from the senior management scheme.
Grace's share price closed at $61 on Tuesday.

What has been an interesting feature of these scheme, is the extent to which the bear run on the Jamaica Stock Exchange has made executives and staff shy away from buying shares - with option price in some cases fixed above current market level.

GUARDIAN

For example, Guardian Holding operates a stock option plan for its executives, to which a total of 17,031,252 shares have been allocated since its inception in 1999.

Four million shares have not yet been granted, and options to buy another 4.1 million shares remained outstanding as at the end of 2005. Those shares can be purchased at an average exercise price of TT$29.12 (J$290), which will expire between February 2007 and September 2009.

No shares options were exercised in 2005.
Yesterday, Guardian traded at $270, a full $20 below the option price.

RBTT

RBTT started its share option plan for directors and senior management in 1999, to which 17 million shares were allocated. The options granted are exercisable at the market value of the shares on the dates of grant, typically the share price at the beginning of the financial year - April 1.

The attractiveness of this scheme to shareholders will therefore depend on the movement in the price of the share in the 12 months following the allocation.
RBTT's share traded for $345 on the day that the shares were expected to be allocated - April 3 this year. They traded for $350 yesterday.

RBTT also has a share ownership plan where employees of subsidiaries incorporated in Trinidad and Tobago have the option to receive their bonuses in cash and/or ordinary shares of the parent company purchased on the open market.

FIRST CARIBBEAN

First Caribbean International Bank Jamaica (FCIBJ) has an employee share ownership plan (ESOP) for eligible employees, to which the bank contributes 50 cents for each dollar contributed by the employees.

FCIBJ records this benefit in salaries and staff benefits in its statement of revenue and expenses, with a corresponding accrual in expenses and other liabilities in the balance sheet. But the bank does not state how many shares are allocated through the scheme.

COURTS JAMAICA

In the case of Courts Jamaica, a share option trust was started in 1993, with shares set aside for future sale to directors and senior managers, and at set prices. Here, stocks are offered at the average of the bid and ask price at the date the option is conferred on the employee.

The Business Observer was unable to determine the precise number of shares at the beginning of the trust. However, it had 18.2 million shares on March 31, 2005, the same as the previous year. It is noteworthy that none of the managers or directors entitled to the options exercised any rights last year.

The Courts option agreement provides for a proportionate increase in the number of shares available under the option when there is a bonus share issue. The number of shares now held in the trust therefore reflects the one-for-two bonuses issued in 2002 and 2003.

The share options are typically granted at this company for five years, after which the options are exercisable by the eligible managers and directors; not before.
For instance, according to information in the company's accounts records, one director and four associate directors, as the company calls them, could have exercised their options on or after January 17, 2005.

The director had a total of 66,667 shares and the associate directors held 10,000 each, available at a price of $2.83 per share on or after the exercise date.

Another director and associate director had 50,000 and 10,000 shares respectively, available at $5.70 and exercisable on or after February 11, 2005.

Additionally, two directors still have share options, 50,000 each, that will not be exercisable until November 1, 2007 at the price of $3.53. Another director has 60,000 share options that are exercisable on or after November 17, 2008 at a price of $3.53 per share.
Courts' share price closed at $3.35 yesterday.

PAN CARIBBEAN

Pan Caribbean Financial Services (PCFS) also uses share option plans with exercise prices that are fixed at market prices at the time of the grant.

Here 450,000 share options were granted to eligible employees in February 2002 at an exercise price of $4.55, the market price at the time. The option will not expire until December 31, 2006.

In addition, 18 million share options were granted on March 8, 2004 at exercise price of $10 per share, 25 per cent of which could be bought annually by the granted employees on the anniversary dates of the grant over the succeeding four years.
PCFS share price yesterday was $16.10.

CAPITAL & CREDIT

Capital and Credit also offers its employees shares at a discounted rate. In August 2003, 2.5 million additional shares were issued to the employees share ownership plan for the benefit of participating employees, and another 4.3 million were issued in 2004.
CCM share price on Tuesday, June 20, 2006 was $14.22.

LIFE OF JAMAICA

At Life of Jamaica (LOJ), share options are granted to management, typically for a five-year period, as part of a performance incentive scheme at a 25 per cent discount on the last sale price on the trading day prior to the grant date. It is exercisable at that price.

LOJ set aside 150,000 shares for a separate plan for senior executives who are entitled to purchase the company stock at a pre-specified price (not given) at some future date.

As at the December 31, 2005, LOJ had 19,045,000 share options outstanding with an average exercise price of $6.14 per share. 3,739,000 shares with an average exercise price of $9.86 are exercisable this year, and 12 million of the 19 million share options will expire by 2007.
LOJ's share price yesterday was $7.15.

JMMB

In the case of Jamaica Money Market Brokers (JMMB), what is in place is a share ownership plan in which a block of the company's shares is set aside for employees.
Of the 1.46 billion shares issued as at March 31, 2005, 181.7 million shares were held by the trustee of JMMB down from the previous year when it was 222.5 million.

The group also offers interest-free loans to its employees to facilitate their participation in the ESOP. This amounted to $29.95 million during the year ending March 31, 2005, down from the $33 million the year before.
JMMB share price closed at $12 yesterday.

PAN JAMAICAN

Both Pan Jamaican Investments and its subsidiary, First Jamaica Investments (FJI), had stock option plans up to the end of 2004, but since they were all exercised by December 31, 2004, no new scheme has been put in place.

For both companies, stock options were granted to executive directors and senior employees - half of which were sourced from new issue of stock with the balance being acquired on the Jamaica Stock Exchange (JSE) when exercised.

For FJI, 6,367,000 shares were exercised at prices of $1.75 and $1.80, during 2004. In the case of Pan Jam, the 3,375,000 stock units were acquired at exercise prices of $2 and $8.94.

MAYBERRY

Mayberry Investments in its initial public offer had set aside 24.6 million shares towards the employee reserve pool, less allotments made to employees. However the company has not, to date, set out a definitive share scheme that would allow the employees access to the pool.

SCOTIABANK

Scotiabank (BNS), in its annual report for 2005, notes that it has an employee share ownership plan, for which the bank provides a fixed benefit to each participant, linked to the number of years of service. This benefit is recorded in salaries and staff benefits expense in the statement of revenues and expenses.

However, BNS does not provide any clarification as to how much of the $4 billion staff cost was attributable to this scheme for the year to October 31, 2005, or how the shares are acquired (JSE or newly issued).

DB&G's ESOP

In addition to the benefit to senior management, DB&G has had an employee share ownership plan (ESOP), since 1997. However, this plan is in essence a loan to employees.
Bunting said yesterday that the share purchase can be fully financed by the company.

"DB&G's ESOP operates to provide shares for purchase by employees (who own less than five per cent of the company) at a discount (between 10 to 25 per cent) to the market price," he said. "Shares have been sold to employees between 37.5 cents and approximately $22.36.

"The shares can be 100 per cent financed by the company at an interest rate of between eight and 12.5 per cent per annum, repayable over four years. The employees are allowed by the ESOP legislation to make payments from their before-tax salary, so they effectively get a 25 per cent discount on the payments."
The shares must be held for two years before they can be transferred to the individual or sold, and for six years after allocation in order to remain entirely tax free.

According to Bunting, the present balance in the ESOP is 14,334,000 shares "which is only a portion of the shares which have passed through the ESOP over the 10 years or so since its introduction".

DB&G share price was $18.23 yesterday.

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