State-owned companies may soon offer stock option

GN Bureau | September 9, 2015



Employee Stock Options (ESOPs) may come into play in public sector enterprises. Instead of cash as part of variable pay, the public sector employees will get ESOPs.

The department of disinvestment has suggested to the department of public enterprises that the performance related pay (PRP) to executives be in the form of ESOP so that employees can become part owners of the companies and have stake in their growth. PRP is a variable component of the remuneration paid to the executives of public sector units.

Currently, the concept of giving ESOP as part of PRP is optional. A portion of the PRP can be paid in the form of ESOPs if employees opt for it. “We want more retail holding in PSUs. By giving ESOPs as variable pay package both the employee and the company benefit,” source said.

In June last year, market regulator Sebi had made it mandatory for PSUs to ensure at least 25 per cent public shareholding within three years. If the ESOP plan goes through, then meeting the 25 per cent public holding limit would get easier for the DoD as the present volatility in markets has somewhat dampened the disinvestment programme of the government.

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