The approved share options issued to Telecom executive employees was intended to align Telecom executives with the company and its shareholders. The significance of issuing shares to employees is partly to provide employment benefits outside of earned salaries. It is meant to give employees incentive and an improved sense of responsibility toward the company. Since an option to purchase shares does not transfers ownership to the employee unless and until he exercises the option to purchase partly paid shares would have been a better vehicle for achieving a reward mechanism.

New Zealand’s Company Act makes provision for the partly paid shares to be issued upon partial payment upon the date of issue with an installment plan for completing the sale. The shares in questions are typically issued upon receipt of partial payment, although the shares can be withheld until final payment is made (Company Act 1993). If the shares are issued upon receipt of partial payment the employee takes immediate possession and is immediately entitled to returns thereon. The shares are sold at the par value price of the stock on the date of issue.

Partly-paid shares different from options to purchase, since the purchase price is not fixed at a date outside of the actual issuing of the shares. Options to purchase shares are generally based on an agreement to purchase the shares at the value of the share on a fixed date. Therefore when purchasing a share on a partially paid plan, the purchaser has an option to pick a date when the share price is convenient for him. On the other hand, the option to purchase robs the employee of making a choice to purchase when the shares are selling at a price convenient for him.

Annual cash payments set by the remuneration committee would certainly overcome some of the difficulties associated with the provision of partly-paid shares and options to purchase shares. The cash payments guarantee that the employee is going to receive a fixed sum of money and does not depend on the declaration of dividends and the par value of shares. Another advantage is that the customer is not bound by some fixed value date as is the case in share options or the value date of the issue of shares (partly paid shares).

Additionally, the employee is not required to purchase anything in return for the annual increments. In order receive any benefits from shares in the company, the employee is obligated to first purchase the shares. The purchasing of shares with the expectation that one will receive dividends is not a given. In fact it is risky, as seen in the present case study when the shares were found to be worthless.

The ultimate benefit of owning shares whether by means of an option to purchase or by a partly-paid acquisition is that the employee ends up with a stake in company by which he is employed. This places him in a position where he owns a part of the company, his employer. If in the end, as it turned out in the present case study, the shares are worthless the employee winds up with nothing more than an assuaged ego.

In the circumstances of this particular case, annual cash payments would have certainly overcome the difficulties associated with the options and the partly-paid shares. In any event, cash is always an appreciable source of reward. Employees would have perhaps been more inclined to accept the cash rewards over options and/or partly-pain shares.