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Rothschild & Co | Annual Report 2017
Staff costs
As part of its variable pay strategy, the Group pays bonuses to employees. In some cases, the cash payment is deferred to future years.
Deferred cash awards are paid one, two and three years after the year of the award, and the expense is recognised over the two, three and four-year
periods from the start of the year of the award to the date of payment. These awards are paid on the condition that the recipient is still an employee of
the Group. For certain employees, a portion of the deferred bonus will be settled in the form of R&Co shares rather than cash, in response to the Capital
Requirements Directive 4 (CRD4). The R&Co shares are released to the employees six months after the vesting date of the award.
A commitment to employees exists in connection with this deferred remuneration. Some of this has not yet accrued because it relates to a future service
period. The amount of potential future payments that have not yet accrued is €79.2 million (€95.5 million as at 31 March 2017).
The objective of the deferred share-based payment awards is to link the reward of certain key staff with the performance of the Group. In addition to the
requirement to remain employed by the Group, these awards may also be cancelled under specific circumstances.
R&Co Equity Scheme
R&Co also operates an Equity Scheme for some of its senior staff. Equity Scheme participants are required to invest in R&Co shares and for each share
owned they are granted four share options. The shares are subject to a four-year lock-up period and the share options granted are subject to a vesting
period before exercise.
Movements in the number of share options outstanding are as follows:
31/12/2017
31/03/2017
Number, 000s Weighted average
exercise price, €
Number, 000s Weighted average
exercise price, €
As at 1 April
3,525
19.4
3,580
19.4
Issued
1,110
32.7
–
–
Forfeited
(80)
–
–
–
Exercised
(220)
17.8
(55)
17.5
AS AT THE END OF THE PERIOD
4,335
22.9
3,525
19.4
Exercisable at the end of the period
1,245
17.8
725
17.5
Share options outstanding at the end of the period were as follows:
Exercise price
In euro
31/12/2017
31/03/2017
Number of
outstanding
options, 000s
Weighted average
contractual life
(years)
Number of
outstanding
options, 000s
Weighted average
contractual life
(years)
€16.01 – €18.00
1,245
5.8
1,505
6.5
€18.01 – €20.00
1,520
5.8
1,560
6.5
€20.01 – €22.00
–
–
–
–
€22.01 – €24.00
115
7.8
115
8.5
€24.01 – €26.00
230
7.8
230
8.5
€26.01 – €28.00
115
7.8
115
8.5
€28.01 – €30.00
–
–
–
–
€30.01 – €32.00
278
9.8
–
–
€32.01 – €35.00
832
9.8
–
–
TOTAL
4,335
7.0
3,525
6.8
The fair value of the share-based payment made in the nine months was €2.8 million (31 March 2017: nil). Fair values are charged to the income statement
over the period of employee service required under the vesting conditions. As the options are equity-settled, there is no liability booked in the balance sheet
in respect of these options, and there is no periodic charge or credit in the income statement as the options change in value.
On issuance, options are valued by an independent valuer using a Black-Scholes option valuation model. The key inputs into this model are the price of the
underlying R&Co shares, the expected volatility of the share price (for which the historic volatility has been the primary consideration), and the estimated
exercise date of the options (which is assumed to be the mid-point between the dates of vesting and expiry). The valuation is based on the assumption that
all recipients will remain with the Group.
Notes to the consolidated financial statements