Share schemes may be shelved after rule change

New rules governing accounting for employee share options may lead to a
third of listed companies considering abandoning their share options schemes.

This is one of the key findings in the second annual survey of employee share
plans among UK companies, conducted by Capita Share Plan Services, Abbey
National and Eversheds.

The survey, of 138 quoted companies, shows that awareness of the recommended
changes to accounting for share options – which will require companies to account
for their employee share option awards in their profit and loss accounts – is
very high among employers.

Nearly one-third of respondents say the changes will make it less likely
they will continue to offer share option plans in future.

Yet, the survey suggests this is the only cloud on the horizon of employee
share ownership. Despite plunging equity markets, the number of companies
offering employee share plans remain strong, as do participation rates among

Justin Cooper, head of share plans at Capita, is confident that the
immediate outlook for share ownership schemes remains healthy, with 72 per cent
of companies in the FTSE 350 now offering a share incentive plan (SIP) or
considering implementing one.

There has also been a 60 per cent increase in the number of SIPs in place
over the last year.

Cooper said: "Despite extreme market volatility, the employee share
ownership ethos remains strong, with employers remaining enthusiastic about the
popular sharesave scheme, and interest in the SIP now growing steadily.

"However, concerns over the likely impact of the proposed new
accounting standards are clearly gathering pace, and may well re-shape employee
share ownership over the next few years," he added.

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