MACQUARIE GROUP may go back to investors for another capital raising because the Federal Government's planned tax crackdown on employee share schemes stands to derail its shake-up of executive remuneration - a program that had the dual effect of bolstering its capital by $500 million.
The bank is likely to be among the hardest hit by changes to the share schemes, which have allowed employees to defer tax on their salary by acquiring shares in the company they work for.
The Government has come under intense pressure from business and unions to soften the changes. Dozens of companies, including Westpac, Perpetual and Suncorp, have placed their employee share schemes on hold as they assess the implications of the changes.
Under the changes, those earning more than $60,000 a year will be taxed up front on share and option packages, even though some of those options may never vest.
A corporate governance analyst, Dean Paatsch, said there was no reason for employee share schemes to reduce income tax. "What's wrong with making people pay income tax on gains they make as a result of selling their labour?" he said.
Mr Paatsch said most people only took part in the schemes because of the tax benefits.
At Macquarie the share program was a key component of an overhaul of pay arrangements that it argued was designed to better align staff with the interests of investors.
During the boom Macquarie was often dubbed the "millionaires's factory" to reflect the large bonuses paid to its bankers. This month it said it would raise $500 million by converting unvested cash bonuses for employees into shares in the bank or its listed funds, as well as an unspecified amount through a retail share purchase plan.
The move needed to be approved by shareholders at the annual meeting in July and is unlikely to go ahead as it stands.
"While it is still uncertain, the proposed legislative changes may lead to an adverse impact on Macquarie's ability to implement the proposed arrangements," the bank said yesterday. It said it would update the market with news of any revised arrangement.
Last month it raised $540 million by issuing new shares to investors. It is seeking another $200 million from retail investors through a share-purchase plan.
Macquarie's tier one ratio - a measure of its capital strength - stood at 11.4 per cent at the end of March. While this was well above the Big Four retail banks, it was down from 12.4 per cent in the September half.
A senior fellow at the Melbourne Business School, Sam Wylie, said stock options provided good incentives for senior management to improve company performance.
