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Journalism of Courage
MUMBAI, April 8: The stock-option panel appointed by the SEBI discussed various issues with regard to the issuance of stock options including the pricing of the same at its meeting held here on Wednesday.
The panel also discussed whether such an option should be granted to employees based abroad directly or as part of the foreign offering by an Indian company. According to panel chairman J R Varma, pricing is the most important issue which necessitated the need for a committee. Currently, the pricing of any stock-option scheme is governed by Sebi’s guidelines on preferential issues, taking as share price the average of the market price over a period of time. The panel also deliberated on safeguards like the definition of an employee; imposition of a lock-in period on an employee’s shares, if necessary, to avoid the misuse of the scheme by companies. Other safeguards discussed included the aggregate capital that should be issued in a year by the promoters or the number of shares issued to an individualemployee. The panel also discussed the need for a comprehensive disclosure system for the allotment of shares under such schemes.
The committee members made various suggestions on the pricing of the stock option. Some said that this could be based on the book value of the shares while others felt that the pricing should be at a discount to the prevailing market price. The members also debated on the need for a minimum benchmark price below which a company would be unable to issue shares to its employees. A minimum benchmark would help safeguard the interest of the other shareholders of the company. "Some kind of a balance would need to be struck so that the existing shareholders do not lose out," said Varma.
The panel members are trying to strike a balance between making the rules effective and at the same time not too stringent as the scheme is considered to be associated with rewards for an employee. Currently, a company issuing a stock options sets up an employee welfare trust which then allots theshares to the employees.
