DILAWAR Hussain’s article “New draft rules for stock option: corporate response” states that since the promulgation of the Public Companies (Employee Stock Option Scheme) Rules, 2001, very few companies have issued employees stock option plans (ESOPs), and the list of documents required to be submitted along with the application for approval of ESOP is a bit long.

In this regard, the SECP would like to clarify that the first ESOP was issued in 2008, and so far 14 companies have issued ESOPs, including the one mentioned in the article. Most of these companies are listed on the Pakistan Stock Exchange (PSX), and shares of most of these companies are performing well. Four new ESOPs are under consideration by the SECP.

Previously, the documents required with the ESOP application were not specified. Now the SECP has specified the documents required to be submitted with the application for approval of ESOPs. The list of documents provided in the Guidelines dated April 27, 2016, contains just 12 documents. All these are simple documents maintained by the public limited companies as a routine.

If someone has any difficulty in understanding the Rules or Guidelines, they may contact the SECP and seek necessary clarification. The Guidelines were placed on the SECP’s website to obtain public comments. The comments received from stakeholders were considered and appropriately incorporated. During the public consultation process, none of the stakeholders raised any objection to the documents listed in the Guidelines.

Mr Dilawar Hussain has quoted one corporate expert as saying that “ESOPs have nothing concrete to ignite interest of company managements.” The SECP would like to state that employees’ stock option plans provide the employees the opportunity of taking ownership in the business. It is expected that those employees who have dual interest in a business will go the extra mile for business growth, which will be in the interest of both shareholders and employees. Stock options are used as compensation and incentives for employees, hence corporates can reduce their cash outflows under these heads.

Bushra Aslam

SECP spokesperson

Islamabad

Published in Dawn, June 13th, 2016