A proposed employee benefit scheme facilitating acquisition of company shares by certain eligible employees of JSW Steel has fallen foul of proxy advisory firms such as SES that has asked shareholders to vote against the proposed plan, calling it “noncompliant” and “failing the test of fairness and transparency”.
The proposed scheme — ‘JSWSL Employees Samriddhi Plan 2019’ – helps employees from grade L01 to L15 to buy equity shares of the company from the open market by availing a loan provided by a lender and a broker identified by the company. Banks can sell the shares if the employee is unable to repay the loan amount after two years.
About 75% of the interest burden is borne by the company and the remaining by the employee, who can acquire a maximum of 0.517% of the issued share capital of the company through this scheme. The plan will be administered by JSW Steel Employees Welfare Trust.
In a report issued by Stakeholders Empowerment Services (SES), the firm has said the scheme is designed to “operate in a regulatory vacuum” and is non-compliant with Sebi regulations that stipulate acquisition of shares from secondary market to be via a trust that should hold the shares for a minimum of six months before transferring it to the employees.
But here employees are acquiring the shares directly with the role of the trust being unclear.
Also, questioning the objective of such a “complicated scheme”, SES said the proposed plan falls short of governance standards as with a lock-in period of 2 years, an employee is forced to hold on to the shares even if their price is falling.
