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Some plans have the implicit objective of improved relations with collectives. It is intuitively felt that widely administered stock option plans would increase the areas of cooperation, focus on corporate performance in the long run and give other connected benefits.

 

The important caveat for the workability of this objective is the faith that can be evoked from the employees in this system.

 

If there are contentious issues ab initio, there could be possible adverse trades-off. There is, in fact, a fear of worker militancy at AGMs even where the employees in the market have bought stock. Mature companies, which have developed a good internal culture, may find no reason to fear this and would possibly find abundant benefits.  The prospect for this objective is rather doubtful in the private sector at this point in time. However, the Public Sector corporations may have to debate further the merit of this objective and the existence of other ambient conditions to achieve it in good measure. The voting rights become important in this context. Employees do not have voting rights till the shares are transferred in their names. In the case of Trusts as special purpose vehicles, the ”public trustee “comes into the picture as neither the trustees nor the beneficiaries have the right to vote.

 

 

In USA, the ESOP has been used to prevent hostile take-overs with the employees tending to support the existing managements. Though such a possibility in India is remote, it is nonetheless an important emerging objective for some. The role of the ““Public trustee” becomes important in such cases.

 

Factors leading to success

 

The set of objectives would obviously be different from one organization to the other. If research in the West shows diversity and occasionally unimpressive conclusions on stock option plans, it only points to the need for:

• Proper choice of objectives,
• Design of the plans,
• Their alignment with corporate strategies.

Stock option plans indeed increase the flexibility and repertoire of corporate tactics to meet the new economic compulsions and have little substitutability. It may be affirmed that stock options will soon be a norm in several progressive companies for differing sets of objectives. Concurrent with the above is the other aspect of equity pertaining to performance related payments. Stock option plans are a good mechanism for administering Performance Management Systems and several companies have this as an important reason for choosing the stock option route. The increasing differences in individual performances and acknowledgement of uneven returns from human resources to corporate competitiveness, result in commensurately increasing differentials in performance related pay. As huge differences in cash compensation are unwelcome and also are not necessarily tax-efficient, a good stock option plan may supplement the performance pay as also compensation per se.