[PODCAST] A Universal Benefit: Micaela Costello on Harnessing Broad-based and Executive Equity Plans

Headshot of Micaela Costello Head of Executive Compensation at CSL as Guest on Shareworks Podcast on Marrying Broad-Based and Executive Equity Plans, beside with the words 'Thriving Globally with Equity' in teal.

 

 

In some companies, equity remuneration is the sole preserve of the C-suite and senior managers. It’s there to strengthen loyalty, align objectives, and, in some cases, account for a lack of capital.

But other organizations offer equity more broadly. They use it to recruit the best talent, retain valuable employees, and encourage an ownership mentality. When designed and executed well, employee equity plans are just as powerful as their executive counterparts.

Consider Australian biotechnology group, CSL.

In 2002, the company rolled out a broad-based equity plan to all its employees. Since then, it’s become one of the most widely supported and well-received benefit programs across the business.

It’s called the Global Employee Share Plan or GESP and operates as a post-tax, salary contribution program actioned through a discount. It has phenomenal engagement all across the world. CSL operates in 39 different countries, and all but two have participants of the broad-based plan.

“It was one of the first programs we made available to our employees,” explains Micaela Costello, Head of Executive Compensation, Performance Management and Employee Equity at CSL. “There’s absolute support for that program given that it supports shared ownership by our employees and provides a chance to own a part of the organization.”

But that’s not to say CSL doesn’t offer equity to its executives. It does — and that is a whole other story.

 

Adapting, replacing, and improving plans

Costello joined CSL in the fall of 2013. Back then, it was significantly smaller than it is today. It had just 11,000 employees, and although its HR department was well-established, its employee equity team was still very small. In fact, it was just Costello.

But neither CSL nor its equity team would stay small for long.

CSL acquired Novartis’ vaccine arm and spun it out into a subsidiary called Seqirus, which is now one of the world's largest vaccine manufacturers in the world. Across the whole CSL group, headcount swelled to nearly 30,000. Revenues and profits grew, too.

But the company’s growth also attracted more scrutiny from shareholders, regulators, and the media. In 2016, investors raised concerns over its executive compensation packages. So, in partnership with the board, Costello began rehabilitating CSL’s compensation programs. She cut many of the company’s old legacy programs, including an option and performance rights plan for senior management.

“When you're trying to manage legacy programs and your new programs, and you’re trying to explain everything to everyone, that's when it gets difficult,” Costello explains.

She also developed a single, globally competitive pay structure, paying particular attention to alignment. Her new structure tied executive reward to both business performance and shareholder return. In other words, executives had to drive real achievement to earn their full reward.

Costello says the changes made CSL more market competitive and made it easier for people to identify, engage and retain key talent within the group.

 

What you’ll learn from CSL:

●      Why CSL’s culture appealed to Costello: “I'll never forget my first day at CSL, where I met with an employee to answer questions about her tax statement for the year. We talked about her career at CSL. She'd been with the organization for about 25 years at that point. Everything the company does is about saving lives and protecting public health. That resonated with me. Right from day one, I saw that it’s part of CSL’s DNA and culture. It has real meaning.”

●      The challenges of running a global equity program: “The key words are legal, tax and compliance. For example, we have operations in China, so we face SAFE registration on an annual basis. Then we have the tax perspective with withholding obligations, reporting obligations, and so on. At the other end of it all, when you're implementing things through payroll, you're relying on different payroll systems across 39 different countries.”

●      How employees use share ownership at CSL: “It's a great employee benefit for us — and we're very lucky that our share price does so well from that perspective. But it's also about looking at it as another investment option for employees. It helps them save for their futures. A lot of our employees also use it as sort of a savings vehicle.”

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