VEON management increases share ownership
VEON (NASDAQ: VEON), a global digital operator, announced an increase in management's ownership of VEON shares through equity incentive-based compensation plans. Utilizing part of the 92,459,532 common shares issued to VEON Holdings BV on 1 March 2024, the company awarded shares to its top executives under various plans including Short-Term Incentive (STI) 2023, Project Awards, Special Awards, and Long-Term Incentive (LTI) 2024. The awards aim to align management incentives with shareholder returns and company value creation. Key figures include Kaan Terzioglu receiving a significant number of shares across different award types, and similar grants were made to other executive members like Joop Brakenhoff and Omiyinka Doris. The LTI 2024, linked to performance relative to peers, will vest at the end of a three-year period.
Positive
The increase in management's share ownership through equity awards can strengthen alignment between management's incentives and shareholder interests, potentially leading to more focused leadership on company performance.
The detailed and structured award plans (STI, Project Awards, Special Awards, LTI) indicate a clear strategy to incentivize key executives, which might enhance their commitment to achieving the company's goals.
The LTI plan is performance-based, specifically tied to the company's relative Total Shareholder Return (TSR) against its peer group, which could foster a competitive and performance-oriented culture within the company.
Negative
The issuance of a large number of shares for management compensation might lead to shareholder dilution, potentially affecting the stock price negatively.
The dependency on relative TSR for the LTI plan introduces significant risk, as failing to outperform the peer group could result in non-vesting of the awards, which might not effectively motivate the intended long-term value creation.
The announcement by VEON Ltd. regarding increased management ownership through equity incentive-based compensation reflects an influential trend within corporate governance aiming to strengthen the alignment between management's interests and shareholder value. This approach is commonly adopted to incentivize executives, potentially improving company performance and positively influencing stock price, as incentivized management might be more driven to meet performance targets.
The award details reveal significant share allocations, particularly to top executives, which could enhance their commitment to the company's long-term success. However, investors should observe that such incentive programs could dilute existing shares, albeit this effect might be offset if the incentivized performance leads to value creation surpassing the dilution impact. Additionally, the linkage of Long-Term Incentives to relative Total Shareholder Return (TSR) is a practice that provides a performance-based reward system, connecting executive compensation to shareholder gains directly.
In scrutinizing VEON's use of equity awards from a corporate governance perspective, the requirement for the Group Executive Committee (GEC) to hold a minimum level of shares aligns their financial interests with those of long-term investors. Such policies can be seen as a measure to prevent short-termism in management decisions. The two-year holding period for the Short-Term Incentive (STI) and the one-year holding for the Project Award further reinforce this objective, suggesting a commitment to sustained company performance.
However, the effectiveness of these corporate governance mechanisms depends on the fair determination of performance metrics and the transparency of their assessment. The relative TSR as a vesting condition for the LTI is one such metric that can be tricky to evaluate, as it requires a comparative analysis to a peer group. This peer group should be carefully selected to accurately reflect the competitive environment in which VEON operates. Ensuring the peer group is relevant and the performance metrics are stringent are essential to safeguard the interests of shareholders and prevent potential windfall gains to executives.
From a financial analysis standpoint, the share awards system employed by VEON indicates a forward-looking investment in management that could potentially result in heightened operational efficiency and strategic decision-making. The STI and LTI award allocations need to be factored into the company’s expense forecasts, as they represent a form of non-cash compensation that will be reflected in the company’s financial statements.
Investors often look favorably upon companies that demonstrate a strong culture of performance-based incentives, as this can be indicative of robust future earnings potential. Nonetheless, it is critical to monitor the company's performance over the vesting period to ensure that these incentive programs are indeed translating into tangible value creation for shareholders.
04/12/2024 - 12:15 PM
Amsterdam, 12 April 2024 – VEON Ltd. (NASDAQ: VEON, Euronext Amsterdam: VEON), a global digital operator that provides converged connectivity and online services, today announces an increase in management’s ownership of VEON shares through awards under its existing equity incentive-based compensation plans. VEON is utilising certain of the 92,459,532 common shares issued to VEON Holdings BV, announced on 1 March 2024, to satisfy the awards made.
Augie Fabela, Chair of the Remuneration and Governance Committee, commented on the awards set out in the table below, saying, "The equity awards are a testament to our belief in aligning management's incentives with value creation and shareholder returns. These awards recognize the contributions and key roles of our top three executives in successfully driving future success for the VEON Group.”
Figures represent the ADS equivalents of VEON common shares awarded Short-Term Incentive 20231 Project Award2 Special Award3 Long-Term Incentive 2024 Award4 Kaan Terzioglu 57,248 240,169 Joop Brakenhoff 10,515 8,778 2,102 95,913 Omiyinka Doris 5,832 7,524 82,211
As previously announced, GEC members are required to accrue and maintain a minimum level of VEON shares. This will be equivalent to 6.0x the annual base salary for the Group CEO and 2.0x the annual base salary for the other GEC members.
1 The STI 2023 share awards were granted as part of VEON’s Deferred Share Plan. The Deferred Share grant, which represents 50% of the Short-Term Incentives (“STI”) scheme, relates to the period from 1 January 2023 to 31 December 2023 and is deferred into shares under the Deferred Share grant rules. The shares vested immediately and are required to be held for period of two years from 16 February 2024.
2 A ‘Project Award’ was granted as part of VEON’s Deferred Share Plan to Joop Brakenhoff and Omiyinka Doris for their contributions to successfully completing a key project. The shares vested immediately and are required to be held for one year from 5 March 2024.
3 A ‘Special Award’ was granted to GEC member, Joop Brakenhoff, as part of VEON’s Deferred Share Plan granted in December 2021 and is now fully vested.
4 The Long-Term Incentive (“LTI”) 2024 share grant is awarded in relation to the three-year period from 1 January 2024 to 31 December 2026. The vesting of these shares is linked to the relative TSR performance to VEON’s peer group which will be assessed at the end of the plan period.
About VEON
VEON is a digital operator that provides converged connectivity and digital services to nearly 160 million customers. Operating across six countries that are home to more than 7% of the world’s population, VEON is transforming lives through technology-driven services that empower individuals and drive economic growth. Headquartered in Amsterdam, VEON is listed on NASDAQ and Euronext. For more information visit: https://www.veon.com .
Important Notice
This release does not contain or constitute an offer or sale or the solicitation of an offer to purchase securities in the United States. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933 (the "Securities Act"), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from, or transaction not subject to, the registration requirements of the Securities Act.
Disclaimer
This release contains “forward-looking statements,” as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward-looking statements are not historical facts, and include statements relating to, among other things, VEON’s governance, strategy and share compensation plans. Forward-looking statements are inherently subject to risks and uncertainties, many of which VEON cannot predict with accuracy and some of which VEON might not even anticipate. The forward-looking statements contained in this release speak only as of the date of this release. VEON does not undertake to publicly update, except as required by U.S. federal securities laws, any forward-looking statement to reflect events or circumstances after such dates or to reflect the occurrence of unanticipated events.
Contact Information:
VEON pr@veon.com
What was the purpose of VEON's recent share awards to its management?
VEON's recent share awards to its management were designed to align the incentives of the company's top executives with the interests of shareholders and the overall value creation of the company.
How many shares did VEON award to its management in the recent incentive plans?
In the recent incentive plans, VEON awarded a total of 2,299,995 common shares (equivalent to 91,999 ADSs) under the Deferred Share plans and 10,457,359 common shares (equivalent to 418,294 ADSs) as part of the LTI plans to its Group Executive Committee.
What are the vesting conditions for the LTI 2024 awards given by VEON?
The Long-Term Incentive (LTI) 2024 awards given by VEON will vest based on the company's relative Total Shareholder Return (TSR) performance compared to its peer group over a three-year period from 1 January 2024 to 31 December 2026.
What are the requirements for VEON's GEC members regarding shareholding?
VEON's Group Executive Committee (GEC) members are required to accrue and maintain a minimum level of VEON shares equivalent to 6.0x the annual base salary for the Group CEO and 2.0x the annual base salary for other GEC members.
