SECP issues guidelines for structuring ESOS
Islamabad: The Securities and Exchange Commission of Pakistan (SECP) issued guidelines for structuring and offering of the employees’ stock option schemes (ESOS), 2016 under Section 506B of the Companies Ordinance, 1984.
The employees stock option schemes are the programmes offered by the public companies to their employees which give the employees the right, without obligation, to purchase specified number of shares of the company at a predefined price, within a stipulated time period. In developed and emerging markets, ESOS are commonly used by the corporate for retention of their key employees whose services are critical for business growth. The ESOS can be used as compensation as well as incentive for employees. This encourages the employees to develop long term association with the corporate. The ESOS provides the employees the opportunity to get ownership in the company which may help increase productivity and growth in the business of the company.
The purpose of the guidelines is to facilitate the public limited companies in structuring and administration of their ESOS or the schemes.
The guidelines provide for composition of the compensation committee, duties and responsibilities of the committee, methodology for deriving the exercise price, procedure for approval of the Schemes, disclosures to be made in the Scheme, format of application form, list of documents to be submitted with the application and model Scheme.
The guidelines require that schemes must be structured with the intention to align interests of employees and shareholders.
It is expected that the guidelines will encourage public limited companies to use ESOS as a useful tool for gaining loyalties of the employees.