Recently in Taiwan a new law was passed saying companies will be taxed for any stock bonuses given out to employees. Before they could charge this against their earnings and then only get taxed on their profit (after the stock bonuses were deducted). This has led to a major crisis in Taiwan tech firms where most of the annual wages are earned through stock bonuses. To avoid losing talent and to dodge the tax charge many companies have increased salaries by more than 50% to substitute for the stock bonuses that will not be issued in the future.
It seems however Hon Hai will be issuing massive amounts of stock to retain their employees. According to the China Post:
TAIPEI, Taiwan -- Senior executives of Hon Hai Precision Industry Co. will give out up to NT$16 billion worth of the company's stocks to mid-level employees to retain talent, the local United Evening News reported yesterday. According to the report, over 100 senior executives at the different units of Hon Hai, the world's largest contract electronics manufacturer, will take part in the program, dubbed "Passing Down the Torch" and billed as the world's first such program.
Under the program, senior executives will give out their Hon Hai stocks to employees below the manager level deemed by the company as "critically important."
As many as 100 million Hon Hai shares will be given out, translating into some NT$16 billion based on yesterday's closing price of NT$163.
Taiwan's TAIEX index yesterday climbed 184.46 points, or 2.6 percent, to 7,209.04 at the close of trade, posting a 3 percent advance this week.
The givers, however, will need to pay a gift tax.
According to Taiwan's gift tax law, each giver has an annual exemption of NT$1.11 million, after which he or she will be subject to a tax with rates from four to 50 percent, the United Evening News reported, citing officials from Mega Securities.
The program is in line with Hon Hai chairman Terry Gou's management philosophy: "To keep talent is to reward them."
Gou has outlined his talent retention principles in various occasions. First, the company needs to train talent. Second, the company must develop a positive, goal-oriented corporate culture. And third, the company must offer employees a stable, healthy and merit-based working environment.
Gou's philosophy is perhaps best manifested in a NT$100 billion project Hon Hai announced earlier this week -- the building of a "digital technology city," a living space big enough to accommodate 240,000 Hon Hai employees and their families. The city will be equipped with wireless Internet access, intelligent transportation systems and digitized medical provision, all encompassed in a land that stresses environmental sustainability.
Gou is a fairly impressive man. This program equally so. I wonder how many other tech giants will follow suit or if this will be an isolated case?
China Post: Hon Hai execs to give out stocks to retain talent
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