The distribution of profits to employees through stock option plans

An employer may reward its employees in cash or in kind, as well as allow them to access the company's profits. Of course, the employer must consistently implement said choice in compliance with the precise rules and strict processes above all when realised through stock granting or other securities.

An employer often acknowledges its employees by providing them with economic benefits through the distribution of the company’s profits for retention purposes. Although such a grant shall be treated as employees’ ordinary salary, it must improve the minimum economic treatment outlined in the applicable collective bargaining that it cannot replace.

The Italian Civil Code contains precise provisions regarding employee stock ownership and, even more specifically, the regulation of stock option plans. In this sense, section 2349 allows the allocation of profits to the company's employees through special categories of newly issued shares that are assigned individually to the latter.

This is only allowed if expressly provided for in the company bylaws and upon a resolution of the relevant extraordinary shareholders' meeting, which shall define the capital increase necessary for the issuance of the new shares.

Once the decision to distribute profits to employees is made, the company's directors play a crucial role. They are responsible for drafting the stock option plan, which may involve appointing a special committee for this purpose. The plan not only outlines the practical allocation to employees but also assesses the plan's potential success, its impact on employees, and its positive influence on endo-corporate activities.

Additionally, the Italian Consolidated Law of Provisions on Financial Intermediation prescribes that both employees and the Consob (the Italian Securities and Exchange Commission) must be provided with a special informative document exclusively for shares listed on regulated markets.

Once the stock option plan is finalized, the corporate bodies must deliberate on authorising the issuance of new shares and the terms of the plan. The resolution must include specific elements, such as the identification of the offer's recipients, the number of shares to be allotted to employees, the issuance process, and the plan's duration.