Forget cash bonuses, Nomura is turning to stock options to try and keep hold of its top talent.
The firm says there will be a two-year restriction on exercising the stock rights after they are granted, creating a deferred payment that it believes will enable it to hold on to talented personnel for longer than paying compensation entirely in cash.
Nomura also hopes the stock options will help align the interests of executives and other employees with those of shareholders by reflecting changes in shareholder value in compensation packages, in addition to creating a common objective in terms of improving performance and trust by sharing a common incentive plan for employees working in different divisions and regions.
For Warwick Pearmund, a senior consultant for finance sector recruitment at Boyd & Moore, Nomura is making a smart move in an environment where bonuses can’t be guaranteed and at a time when being seen to hand out large bonuses is liable to cause a public backlash.
“One of the things about Japanese banks is that traditionally they haven’t paid as well as Western banks, and that’s still the case in many firms. Nomura in particular is looking to become a global player, but to do that they have to pay people competitively. In the current environment stock options make perfect sense, they are the most politically acceptable way of giving key employees financial incentives to stay,” says Pearmund.
And although stock options aren’t traditionally common in Japanese business, don’t be surprised if we start seeing more companies following Nomura’s lead. “I would suspect it’s a practice you’ll see more of going forward in finance in Japan,” adds Pearmund.