Loan-based executive share plans: DuluxGroup

DuluxGroup's upcoming 2015 AGM seeks shareholder approval to make interest-free, limited recourse loans to the executive Directors. The loans are to purchase shares, to held on trust. The loan amount is repayable at the end of the three year performance period. Because it is limited recourse the executive at worst stands to gain nothing. The executive is not out of pocket if a share price decline means selling the shares to repay the loan nets less than the amount of indebtedness. Performance measures work to reduce the amount of indebtedness by forgiving part of the loan. DuluxGroup has a gateway EPS Growth measure of an average 4% over the three year period. If this is met, how much of the loan is forgiven is based on relative TSR performance against the ASX 200 (excluding mining, financial services, property trusts and overseas domiciled companies). With maximum forgiveness being 30% of the loan amount, executives gain when the share price appreciates. Dividends over the performance period are applied in part to reduce the amount of indebtedness and to met tax obligations.