AS more companies become publicly listed or raise additional capital on the Jamaica Stock Exchange (JSE) and other regional exchanges, employees are not fully utilising the share pools allocated to them, as seen with the recent Spur Tree Spices Jamaica Limited initial public offering (IPO).

Spur Tree’s IPO was successful as the company’s share capital increased by $335.39 million from more than 4,000 investors. However, the 10 million share pool allocated to staff was undersubscribed despite $3 million being given to staff as a grant and them being educated about the offer. This phenomenon isn’t unique to IPOs as other listed companies offer employee share ownership plans (ESOP) or share options to staff along with interest-free loans to provide their employees an opportunity to build their ownership in the company.

When the Jamaica Observer contacted one executive, she explained that a lack of understanding and comfort, along with a desire for consumption over investing in a country of spenders and hustlers were possible reasons staff didn’t take up ESOP or other compensation schemes made available to them.

Attorney-at-law Matthew Hyatt recently said on Twitter, “I asked a Fesco (Future Energy Source Company) pump attendant if she bought Fesco shares on the JSE and she didn’t know what I was talking about. Gave her a quick rundown and she was quite interested. Hope she follows through.”

Fesco and Spur Tree have increased by more than 300 per cent each to $4.69 and $3.21, respectively, since listing. Fesco has established an incentive plan for Fesco service station dealers and employees, as seen in the disclosure showing Fesco Founders Pool Limited selling 124,999,998 shares at $2.25 for $281.25 million on August 23, 2021.

When the Sunday Finance checked the performance of different companies on the Main and Junior markets which offered staff the ability to benefit from ESOP-like plans, most companies were up triple digits in capital appreciation and had dividend yields as high as 4.87 per cent. This means that if someone invested $100 at the start of the year, they’d get a gross dividend payment of $4.87 in that particular year. The capital appreciation outpaced general inflation and depreciation over the same time frame for the listed companies.

Some people informed this newspaper that many retirees use the dividends from different listed companies to cover their retirement compared to the cheque they might get from the National Insurance Scheme which hasn’t kept pace with inflation. Even chairman of NCB Financial Group Limited (NCBFG) Michael Lee-Chin encouraged staff to buy shares of the company when he acquired it in March 2003, when the price was around $3, and said that it would be over $100 one day. This was at a time that he described as the JSE being comatose during the post-FINSAC era, he said, at the company’s recent annual general meeting. NCBFG trades at $126.84 as of yesterday.

“Employees owning shares in their employer can drive engagement and can reduce staff turnover as in both instances, the employee would have a vested interest in the company. I have been involved in more than 10 IPOs, so there are numerous examples, but I am not able to share specifics, unfortunately. What is certain is that equity is the most effective means of wealth creation,” stated GK Capital Management Limited Vice-President of Investor Relations Ryan Strachan.

GraceKennedy (GK) Limited commenced a long-term incentive scheme in 2016, which allows executives to receive restricted stock grants and stock options once performance objectives are met. This is subject to a two-year holding period which is when the options would vest and the executive would be entitled to the stock units. One recent disclosure to the JSE noted that two directors and two senior managers acquired 224,445 shares after exercising their stock options.

GK is currently giving its staff the opportunity to become shareholders or increase their ownership under its 100th anniversary stock offer. It allows staff and direct hires employed before December 31 to purchase 1,000 or 2,000 stock units and get 100 free units. The units are being offered at a 25 per cent discount to the closing price of $102.23. Staff have the option to get a special GK stock offer loan from First Global Bank Limited to be repaid over three years or have salary deductions done for seven months this year in instalments. They have up to March 31 to exercise the offer.

Similar to how companies in Jamaica match pension contributions, some companies also match employee contributions to ESOP plans which vest after two years in most instances. Barita Investments Limited and the JSE also established ESOP and share option plans for employees in 2021 as a way to build the wealth of their staff and retain talent.

Stock options and grants are widespread in the United States of America as a way to retain employees and build up companies without decreasing the company’s cash reserves. Stock compensation tends to outweigh base pay compensation for many senior executives in S&P 500 companies. Tim Cook, CEO of Apple Inc, received US$3 million as his base pay and US$82.35 million in stock awards for 2021. His total compensation came up to US$98.73 million while he acquired five million shares in August valued at $754.08 million.

“JMMB Group sees the provision of financial education through our various series, namely JMMB Goal Getter and JMMB Elevate, as an avenue to stand for the best interest of our clients and the investing community. In fact, the focus on wealth creation this year,was driven in part by the feedback from previous attendees, as such we sought to identify the right speakers to share their knowledge and provide the necessary tools to support individuals in levelling up their wealth. This is also in keeping with who we say we are as a financial services provider. We want to help individuals to make informed financial decisions, thereby staying true to the essence of our late co-founder, Joan Duncan, whose vision was to make the money market and by extension wealth creation accessible to the ordinary Jamaican,” JMMB Group Chief Market Officer Kerry-Ann Stimpson added on the value of financial literacy to the Jamaican workforce.