Rostelecom improves employee long-term incentive scheme
Moscow, Russia – October 19, 2016 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces that its Board of Directors has made a number of important decisions to develop the long-term incentivisation of all Rostelecom employees.
The Company is looking to support its successful transformation into a digital services provider, and ensure sustainable long-term growth and shareholder value, by launching both a new long-term incentive programme and a new corporate pension scheme.
The new long-term incentive programme (LTIP or Programme) is based on the principle of co-financing the purchase of Company shares by employees (share matching plan, SMP). Any employee can become a member of the scheme by contributing a portion of their bonuses in order to purchase the Company’s securities. The participant is entitled to additional remuneration from the Company's shares, depending on their position and the size of invested funds as well as individual and Company`s performance. The Programme is set to run for 3 annual cycles, in 2017, 2018 and 2019.
The LTIP simultaneously takes into account the personal effectiveness of staff, which results in variable compensation, as well as the achievement of corporate goals based on key performance indicators of the Programme: free cash flow (FCF), net profit and return on invested capital (ROIC).
To implement the incentive programme, the Company is proposing that between 2.9% to 6.0% of the Company’s ordinary shares is dedicated to the Programme. The vesting period is 6 months. Senior managers retain the right to participate in the second and third cycles, while maintaining at least 50% additional shares granted under previous cycles.
The programme will be implemented through a closed-end investment fund (CEIT), which will act as an intermediary between the participants’ incentive programme and the market. In this case, it will offset price fluctuations during the process of trading securities as part of the long-term incentive programme.
The new Programme will replace the scheme adopted in March 2014 for management between 2014 and 2016, which expires at the end of this year. The Programme involved up to 200 senior and middle managers.
To further improve the employee incentive system, Rostelecom will also introduce a new corporate pension scheme, and capital allocated to the scheme will consist of contributions from employees and the Company. The new system will provide the flexibility to manage savings (vesting, the possibility of formation of the redemption sums, inheritance), and the size of pension payments will be linked to employee performance.
"The new programme corresponds to best practices, operating on the principle that good performance is compensated. The scheme also fosters a real sense of ownership in the business, while also providing additional focus towards transforming the existing business model to a digital services company. The proposed incentive programme is designed to motivate existing staff to over-achieve and it will help attract the best professionals to the Company. I am sure that the implementation of the Programme will be an extra incentive to successfully execute the Company’s business objectives to ensure shareholder value growth."