Translation. Region: Russian Federation –
Source: Central Bank of Russia
An important disclaimer is at the bottom of this article.
The Bank of Russia and the Ministry of Finance advise public companies to structure their remuneration policies so that management incentives are aligned with investors' long-term shareholder returns. These recommendations are intended for issuers whose shares are already traded on the stock exchange, as well as those preparing to enter the equity capital market.
The document is intended to motivate individual employees and senior management to work toward capitalization growth and market-oriented performance. Currently, only one in three listed issuers has programs that entitle managers to receive shares as compensation for achieving key performance indicators (KPIs).
Information letter with recommendations published on regulators' websites. It describes examples of both good and bad practices and proposes unified approaches to program development, including the selection of KPIs, program duration, conditions, forms, and payment amounts.
It is recommended to use total shareholder return (TSR) as indicators (it takes into account the share price and dividends paid), and if dividends are not paid, the market value of the company (capitalization).
It is desirable for the program to be long-term – at least 5 years. For companies with a short investment cycle (for example, in the retail sector), the term may be shorter – 3 to 5 years. During this period, bonuses should be distributed unevenly, with the bulk of payments shifted to the final stages. It is recommended to set a cap on the bonus pool: it can reach 2 to 5% of the issuer's market value.
Following these recommendations will improve the effectiveness of incentive programs, positively impact the investment attractiveness of shares, and contribute to achieving the national goal of ensuring stock market capitalization growth to at least 66% of GDP by 2030.
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