The change is in response to shareholder concerns about the need to align the interests of management and shareholders without causing unnecessary dilution though stock option plans. The amendment applies to any new grants, as well as existing options, according to a news release.
Under the amendment, employees will have a choice when exercising their in-the-money stock options, either taking cash from the company, or electing to receive the shares for settlement on the open market.
Stephen MacPhail, Executive Vice-President, Chief Operating Officer and Chief Financial Officer, believes the amendment reconciles investors’ concerns about dilution with the desire to tie management compensation to results: “What we are doing is no more than settling our options expense with cash, rather than stock, and doing it on a tax-deductible basis.”
As a result of the amendment, CI will record a compensation expense of approximately $36 million in its fiscal fourth quarter, based on the total number of in-the-money options and the current stock price of $10.68. This expense includes all options CI has issued for the last six years that are outstanding and will be tax deductible thereby, reducing the cost by about 35% or approximately $13 million.
CI Fund Management is an independent, Canadian-owned investment management company with approximately $31 billion in assets as of March 31, 2003.