Eircom resumes talks with IAIM

After a bumpy start Eircom has resumed discussions on a proposed share option plan for its top executives with the Irish Association of Investment Managers (IAIM). Earlier discussions between the parties were fraught. Some sources described the plan as proposed by the group as indicative of a "huge level of corporate greed".

But Eircom now needs to move ahead to have a scheme approved by the IAIM to put to its shareholders at its annual meeting on September 13th. Because the company is required to send details of any plan to its shareholders some 21 days before the meeting, with the notice and other details time is running out to get a plan in place this year. Eircom needs to get approval from the IAIM within the next few weeks.

For its part the IAIM is expected to drive a tough bargain on the performance-related measures that it will want to see as part of any executive share option arrangement. Given the dramatic fall in the Eircom share price from its flotation level of €3.90 (£3.07) and subsequent high of €5.00 to around €2.78 now and the number of disgruntled shareholders, there will be resistance to allowing the executives who have presided over the share price fall to benefit from getting share options at current price levels.

Eircom wants to base the measure of executive performance on Total Shareholder Return (TSR), which Eircom describes as measured on a range of company-specific operational criteria including any growth in the share price. But IAIM insists that TSR is based on share price performance and gross dividend per share and argues that it relies too heavily on factors outside the immediate control of the company.

Whatever final plan is agreed, Eircom's ordinary shareholders will have their opportunity to comment on September 13th. But Eircom will have to work hard to sell any plan that uses shares to reward executives in the current share price environment.