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, 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, and a potential company-wide profit-sharing payment. 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.
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.
An option may be exercised only if, on the third anniversary of the date of grant of an option, the company’s volume weighted average share price on the NZX Main Board over the five business days before that date, exceeds the “escalated price” on that date. The exercise price of an option is the company’s volume weighted average share price on the NZX Main Board over the five business days before the grant date. The escalated price is determined as follows:
At each anniversary of the grant date of an option, a “base price” will be calculated by:
The escalated price on any particular anniversary of the grant date will be the base price determined as at that anniversary of the grant date, determined in accordance with the above.
The Board is given discretion to adjust the terms of the option if a takeover or other change of control transaction occurs in respect of the company, so as to allow option holders to participate in the benefit of that transaction.
Unless otherwise determined by the Board, options lapse on the holder ceasing to be employed by the company or a subsidiary. If an option holder ceases to be employed by reason of serious illness, accident, permanent disablement, redundancy, or death, the holder’s options remain in force until the end of the later of six months of the leaving date or 5pm on the last date of the exercise period.
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 that performance share right for one ordinary share in the company at no cost. Whether (and how many) performance share rights become exercisable will depend on the company’s gross total shareholder return (TSR) performance compared to the performance of the Dow Jones US Select Medical Equipment Total Return Index in New Zealand dollars over the same period (the Index return). The company’s TSR will be calculated and compared against the Index return on the third anniversary of the grant of the performance share rights (the PSR Performance Period).
If no performance share rights are exercisable because the company’s TSR over the PSR Performance Period has not exceeded the Index return over the same period, the performance share rights lapse. PSRs will also lapse if the employee leaves the service of the company for reasons other than serious illness, accident, permanent disablement, redundancy or death.
The Board is also given discretion to adjust the terms of the PSRs if a takeover or other change of control transaction occurs in respect of the company, so as to allow PSR holders to participate in the benefit of that transaction.
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.
The Board is given discretion to adjust the terms of the ESRs if a takeover or similar transaction occurs in respect of the Company.
Shares are issued at a discount of up to 50% of market price (to a maximum discount of $500), on terms permitted by the plans in accordance with the relevant provisions of the New Zealand Income Tax Act 2007 and the Income Tax Assessment Act 1936 of Australia 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 holding period between grant and vesting date is three years. Dividends paid during the holding period on shares allocated to employees under the plans are paid to the employees. Employee participants are not able to deal in their allocated shares during the holding period and do not have voting rights during this period.
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 holding 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.
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 9 February 2023.