High Profits. Handsome earnings per share. Capital gains. Regular returns on investment. Cash dividends. All these terms will attract the attention of any savvy investor. Even make them feel excited. These are the benefits a company and its corporate management offer to its shareholders.
However, in order to achieve investor satisfaction, a company must make prudent business decisions. It must carefully deploy, allocate, develop and utilise the available resources, look for opportunities and take timely actions. This process, continuous and evolving in nature, demands a focused, diligent, fair and transparent management of the affairs, business and operations of the company. The role of the management and employees in this regard is highly critical.
Companies generally operate in a democratic fashion. The shareholders and directors have voting rights and the will of the respective majority prevails. This decentralisation or sharing of power and responsibilities ensures that collective wisdom supersedes individuality. It also promotes sharing of ideas and healthy exchange of views. The result is a creation of a motivated workforce designed to accomplish common goals for mutual benefit.
Pakistan’s corporate sector is progressing well. It is encouraging to note that many corporate policies and practices, decision making procedures, management tools and techniques in vogue in the developed and developing countries are slowly finding their way into our corporate life. One such model that has changed the corporate landscape globally is called Employees Stock Options Plan (ESOP).
The ESOP did not become an overnight reality. It is not a brainchild of some corporate guru or an attempt by clever shareholders to save taxes. ESOPs owe their existence to the untiring efforts of employees of developed countries who stood up against exploitative practices and demanded that they be recognised, respected and rewarded.
Sadly, in many underdeveloped regions, including ours, the master-servant dynamic even today governs the relationship of a private sector employer and an employee. Under our legal system a private sector employer can arbitrarily dismiss an employee and bear no consequences for their wrongful actions. Our courts have held that such employees may sue the employer for damages but their service cannot be reinstated. It has been held in many cases that an unwilling employer cannot be directed to reengage an employee whose services were terminated. The lengthy legal proceedings discourage the employee from approaching courts of law. They cannot afford the luxury of fighting a legal battle and that too for a long time and with little chance of success. Their priority is to earn a decent livelihood. In this weakness lies the strength of the employers.
The developed economies and their courts introduced and enforced employee rights through the concepts of wrongful termination, restitution and payment of damages. Corporations realised that employees held the key to success. Research showed that companies with satisfied employees though small in size became more profitable than large companies with an unsatisfied workforce. This research set a new trend. The era of employer-employee partnership had begun.
The advancements in the field of Human Resources gradually transformed the corporate behaviour towards employees and guiding principles in this regard have been established. First, it must be understood that an employee is a human being with the same human rights, emotions and sentiments as that of an employer. This allows a sense of equality amongst everyone in the work place. The closed door policy has been replaced by a welcoming open door one.
Second, the employee is believed to be an asset and not a liability. This frame of mind naturally changes how an employer addresses the employee related issues.
Third, the employee is part of the organisation as much as the employer. This philosophy removes segregation in the organisation and allows the employee to play as a team member. It stands established that “people work better when they are working for themselves”.
Fourth, respect and appreciate your employee. It has been observed that genuine respect and appreciation afforded to an employee will enhance their capacity to perform willingly. Respect motivates, invigorates and stimulates the employee to accept the challenges with an open heart. Fifth, the employees must be encouraged to participate in decision making without disturbing the general management structure.
Sixth, pay and allowances only cover the work hours given by the employee. They may not incentivise him/her to perform better or go the extra mile. So a good HR policy ensures that employees who are dedicated to the cause of the company are rewarded accordingly. Seventh, the employer must adopt and apply employee grievance redressal procedures. Most employee grievances can be resolved if they are given a patient hearing.
Before proceeding further, it’s important to briefly discuss the basics of ESOPs and how they are enforced.
ESOPs gives an option to the directors, officers or employees of the company as to which option gives such directors, officers or employees the benefit or right to purchase the shares of the company at a future date at a predetermined price.
In simple terms, ESOP is a right offered by the company to its employees to acquire the shares of the company. This right when exercised makes the employee, a member of the company. Such “employee member” is then entitled as a member to receive dividends/profits as per their shareholding, and if the ESOP so provides, participate in the shareholders meeting and exercise their right to vote. Essentially an ESOP is an incentive offered to the employees in addition to other benefits they receive for rendering services to the company.
…. To be continued.
