The regulatory framework and applicability of share option schemes in Maltese listed companies

Abstract

The aim of this study is to review the concepts of executive/employee's share options schemes within the Maltese listed companies such as the regulatory guide, along with its applicability, benefits, risk factors and evaluation of whether it merits back up in the Maltese environment. Information about the consideration of other alternative compensation schemes will also be discussed. This was achieved by means of a semi-structured questionnaire which was distributed amongst the Maltese listed companies in order to gain an understanding of their views. Findings indicate that share option schemes have not yet achieved the popularity they have gained in other countries abroad. The main reason seems to lie in the mentality of Maltese businesses (cultural aspects). Nonetheless, there is still the potential for the implementation of share option schemes locally. Maltese listed companies are not different from foreign firms in structure and human resource management and despite some limitations such as the inefficiency of the Malta Stock Exchange and difficulty in educating the staff, there are a number of advantages, mainly in terms of incentive alignment, motivating and attracting key employees. These equally apply to Malta as they apply abroad. The research also finds evidence that listed companies still rely on cash-based salary. However, they might even start to consider the implementation of restricted share schemes to mitigate the shortcomings of share option schemes.