Reliance announces ESOPs for 18,000 employees

Reliance Industries Ltd has announced a jumbo employee stock

option plan that will cover 18,000 employees from the top honchos
down to junior management. The company has informed the stock
exchange late on Saturday evening about the decision to offer 2.87
crore shares as a part of this stock option plan.

The value of these shares at today’s price works out to a little more
than Rs 4,000 crore.

According to industry estimates this would be the largest ever

employee stock option plan for the manufacturing industry in India.
While this is commonplace in many of the service sector companies,
especially in the information technology services, in other sectors
ESOPs are mostly restricted to the top management.

At the last annual general meeting of the company the shareholders

had approved the employee stock option plan of Reliance Industries.
The company’s board has the approval for issuing more than five
crore shares through the scheme up to a maximum limit of five per
cent of the company’s total equity capital.

The shares under the ESOP announced on April 14 will have a seven-
year vesting period and the employees will get on an average five
years for exercising their options to acquire these shares. The pricing
will be under a pre-determined formula.

Details of how the 2.8 crore shares will be distributed among

employees will be announced later..

Recently, another manufacturing major Larsen and Toubro has

allotted more than seven lakh shares through a stock option plan of
which one per cent was allotted to the company’s directors.

Interestingly, Indian Petrochemicals Corporation Ltd, another

Reliance group company already has employee shareholders who got
their allotments as a part of the disinvestment process. Reliance too
had acquired a controlling stake in the company through the process.
With the process of merger of IPCL and Reliance on the rails, the
IPCL employee shareholders will also be allotted Reliance Industries
shares in due course.

ESOP DEVELOPMENT PROGRAMME.

The conference took place on March 13, 2008, in Mumbai, Taj Mahal Hotel and
March 14, 2008, in Bangalore, The Oberoi Hotel.

Organized by ESOP Direct, Confederation Of Indian Industry and Global

Equity Organization (USA) it brought together 150 attendees including key
executives from Large and Medium Sized Companies, Venture Capitalist
Funds, Consulting firms, Government of India Undertakings, Business Schools
from across India.

The conference explored the forces underlying changing view, trends arising
from these changes, and the implications for companies that currently maintain
or are considering implementing ESOPs.

The conference was designed to enhance understanding of complex topic,

emphasizing recent developments and emerging techniques. It featured
academic evidence available to support productivity results or other favourable
business outcomes in India and globally.

The conference featured presentations on global trends by foreign speakers with

vast experience in the field of Employee Ownership. It provided a wealth of
information on all the important aspects of ESOP design, including setting plan
objectives, types of ESOP Structures, challenges in implementing, trends in
India and keys to successful ESOP plan.

Over the various sessions covered regulatory issues relating to SEBI Guidelines,
RBI and FEMA, Companies Act, CBDT, Compliance, Tax implication for
Indian plans When the ESOP plans extend to employees in other countries
needed to be revised the conference focused on some of the regulatory issues
that need to be revised or clarified. It provided an update on changes in
regulatory requirements in terms of Indian as well as Global Plans.

The conference featured case studies which explain unique compensation

philosophy the companies use and how they use stock as the cornerstone in this
philosophy. The case study illustrations help support the academic evidence of
impact of ESOP on Productivity, Performance and Share holders Return.
At the conference ESOPs were discussed from both HR standpoint as well as
from the legal and tax perspective. It was aimed at companies to leverage
information to gain competitive advantage.