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However, it is only during the last few years that there have
been any publicly acknowledged and legally sound versions of equity-linked
plans. Strictly speaking, all the plans, other than those that may have been
initiated under the SEBI guidelines for the ESOS, are not option plans, as these
do not involve “options” as instruments. There is a need to make this
distinction - as all stock related plans are not necessarily option plans.
There have been several one-time offers to employees while
raising equity or as preferential allotments, but these are mere precursors to
more advanced and structured plans that we notice now.Prominently quoted examples of such
structured equity linked plans are those of Infosys Technologies, Global Trust
Bank, Sat yam etc. There has been a discernible concentration of the I.T and
Finance / Banking companies in this experimentation so far, due to the special
manpower and compensation dynamics that they have been passing through.
However, several in the manufacturing, both in the private and the public sector
are evaluating the merits of this instrument, which appears inevitability.
Further, the reference to stock options in the last two Budget presentations by
the Finance Minister has sparked a surge in the interest of corporate, both
public and private.
The guidelines issued by the SEBI, despite several
contentious issues, have come as a good step in the direction of promoting stock
option plans.The amendments to
exchange control regulations of the RBI and guidelines in respect of stock
options linked to ADR / GDR issues have also contributed to the swift progress
in the spread of this knowledge and technique.
Why do we need such policy directions and regulations?
The stock option plans can have a great bearing not
only on the employees but also on the control, governance, accounting,
risk, disclosure / reporting and related issues. A one-time offer of
shares to employees by which they accept or reject within a stipulated
time-period is a simple method. It also would have very simple
objectives. The more complex the objectives, the more complex would be
the plans and more would be the legal and regulatory issues. Thus, a
stock option can achieve several objectives than that of a simple
one-time offer.
A stock option is an opportunity to buy stock at a
set price, sometime in the future… The term ‘stock option' means the
right or privilege to buy stock under an offer continuing for a stated
period of time.
