VEON management increases share ownership
- 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.
- 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.
Insights
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.
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 |
In connection with these above mentioned share awards, VEON’s Group Executive Committee (“GEC”) received a total of 2,299,995 VEON common shares (equal to 91,999 VEON American Depositary Shares (“ADSs”)) within the scope of the VEON’s Deferred Share plans, and the GEC were granted a total of 10,457,359 VEON common shares (equal to 418,294 ADSs) as a part of the LTI plans. The grant amounts set out in the table above reflect the net award amounts transferred to each of the GEC members after deducting shares to cover withholding taxes (as applicable), save for the LTI 2024 awards which are unvested and reflect the gross award amounts.
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
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
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
Hande Asik
Group Director of Communication
pr@veon.com
FAQ
What was the purpose of VEON's recent share awards to its management?
How many shares did VEON award to its management in the recent incentive plans?
What are the vesting conditions for the LTI 2024 awards given by VEON?
What are the requirements for VEON's GEC members regarding shareholding?
