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ACCA Strategic Professional · Strategic Business Leader · Enabling success: talent management

Dalton Software plans to retain its senior developers, who are in short supply. The HR director proposes share options that vest only after four years of continuous service. Which statement best describes the main retention implication of this design?

Share options vesting after four years' service act as golden handcuffs: developers forfeit value if they leave, which supports retention. But the reward depends on service rather than performance, so it may retain disengaged staff and does not replace other motivators or non-financial rewards.

  1. AIt acts as 'golden handcuffs', raising the cost of leaving, but it may keep dissatisfied staff in post and does not by itself motivate performanceCorrect
  2. BIt removes the need for any non-financial reward because share options satisfy all of Maslow's needs
  3. CIt directly rewards individual output each year, so it is a short-term performance bonus
  4. DIt guarantees alignment of developers' goals with those of other stakeholders such as customers

Explanation

Deferred, service-conditioned equity makes leaving costly (golden handcuffs), which helps retention. However, it is tied to time served rather than output, so it may retain disengaged staff. The other options overstate its effect or misclassify it as an annual bonus.

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