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ESOP as variable pay for PSU staff

PRP is a variable component of the remuneration paid to the executives of CPSEs
New Delhi: State-owned companies may soon have to offer only Employee Stock Options (ESOPs) instead of cash as part of variable pay to staff if a proposal mooted by the finance ministry goes through. The Department of Disinvestment under the ministry has suggested to the Department of Public Enterprises that the Performance Related Pay (PRP) to PSU 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 CPSEs.
“We have suggested to the DPE that PSUs may be asked to offer ESOPs to make up for the variable pay component of the staff,” a source said. 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,” the source said.
Explaining the benefits of ESOPs, the source said that the employee would think he/she is part owner of the company and would want to work for the better profitability of the company. If employees get equity in the PSU, that would help increase retail holding in the company.
In June last year, market regulator Sebi had made it mandatory for PSUs to ensure at least 25 per cent public share holding 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.
( Source : PTI )
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