GEO INSIGHTS

The Canadian government has deferred the proposed increase in the capital gains inclusion rate and corresponding reduction in the employee stock option deduction from June 2024 to January 2026. As a result, for 2025, qualifying employee stock options will still benefit from the current one-half deduction rate when calculating income tax withholding. Additionally, the Canada Revenue Agency has provided temporary relief from late-filing penalties for certain information returns, while Revenu Québec will maintain the one-half deduction but has not announced similar penalty relief.

Starting January 2025, Israeli companies offering equity compensation will face significant changes in reporting requirements due to updates from the Israel Tax Authority (ITA), including a mandatory shift to an online reporting system. Companies will need to submit quarterly and annual reports with detailed information about equity awards, employee status, and tax withholdings, as well as complete comprehensive questionnaires about their plans. Non-compliance with these new requirements could jeopardize employees' tax benefits, lead to audits, or result in financial penalties, making early preparation and expert guidance essential for ensuring compliance.

Aspo Plc is introducing a new long-term share-based incentive plan for key employees, aligning their interests with shareholders by linking rewards to performance metrics such as total shareholder return and sustainability targets. The previous long-term incentive plans for 2023–2025 and 2024–2026 are being terminated, and the new plan will run from 2025 to 2027, with rewards delivered in spring 2028. Additionally, part of the short-term remuneration for key employees, including the CEO and executive committee members, will be paid in shares, with up to 320,000 shares allocated under this plan by spring 2026.

The adoption of employee share plans among companies listing on the Hong Kong Stock Exchange (HKEX) rose from 57.3% in 2013 to 68.5% in 2023, reflecting a significant increase over the decade. While share option schemes were once the norm, companies in 2023 increasingly favored share awards as their preferred incentive method. The IT and healthcare sectors led this trend, with share-based compensation making up 42% of total remuneration for key healthcare executives—the highest among all industries.

In 2025, employee ownership (EO) is expected to expand globally, with the United Nations declaring it the International Year of Cooperatives, emphasizing the role of worker cooperatives in sustainable development. Government policies at the local and national levels will increasingly support EO as a strategy for economic resilience, with new legislation and funding mechanisms promoting transitions to employee-owned businesses. Additionally, private equity, diversified capital providers, and rising trust conversions will contribute to a broader adoption of EO models, helping workers build wealth, preserve business legacies, and strengthen local economies.

Employee equity compensation is expanding beyond executives to include employees at all levels, with companies offering more flexible equity options such as performance units and restricted stock. However, increased regulatory complexity, particularly around 10b5-1 trading plans and SEC rules, requires careful planning and compliance. As equity compensation evolves, companies are encouraged to seek external expertise to navigate these changes effectively.

Barclays is granting shares to around 90,000 employees for the first time, offering stock awards valued at £500 each as it prepares to announce its 2024 annual results. The initiative, costing between £45m-£50m, aligns with CEO CS Venkatakrishnan's belief in promoting equity ownership to stimulate markets. The bank is also expected to report progress in its investment banking business, while Venkatakrishnan's own pay package will be adjusted, with bonuses potentially pushing his total compensation above £14m.