Employee Stock Ownership Plan (ESOP), in simple terms, is the sale of shares by businesses to excellent employees and labours based on selected criteria at favourable price, which is often much lower than the market price. The advantage of ESOP is that it is not only a strategy to retain good people but also enables businesses to increase capital for banks.
The bank share prices throughout 2017 and the early months of 2018 increased sharply and bank stocks have regained “king” position. According to many experts and securities companies, stocks of the banking sector will continue to prosper. Thus, owning more shares, especially shares from dividend payment, bonus shares, and ESOP shares is the expectation of many people.
Vietnam Technological and Commercial Joint Stock Bank (Techcombank) is the pioneer in this year’s ESOP plan. At its Annual general Meeting (AGM) in early March, the bank’s shareholders approved the plan to issue shares to employees. The issuance source is from the treasury fund with approximately 17 million shares.
Certainly, the bank also stipulates the conditions for the purchase of ESOP shares, which is that employees must have at least one year working at the bank. In addition, there are also other criteria such as N-1 employees and reached A1 for the previous year, employees with Talent Pool Band 7 or above, and reached A2, employees recorded high Band7 for the previous year, etc. The purchase price of shares is 10,000 dong per share, while the stocks are traded on the Over-the-counter (OTC) market at up to 100,000 dong per share.
In 2016, Techcombank also approved the ESOP but only received 78.75 percent votes of the shareholders participated in the meeting. This year, the approval rate is absolutely 99.86 percent. It is understandable as Techcombank recorded good business results in 2017, and the bank’s employees also recorded the leading average productivity.
Vietnam Prosperity Commercial Joint Stock Bank (VPBank) is also submitting shareholders the ESOP plan to issue 33 million shares to the bank’s employees in the second quarter of 2018. The issuance price equals to the par value, much lower than the recent price on the stock market (62,000-64,000 dong per share).
Vietnam International Commercial Joint Stock Bank (VIB) is also setting up the ESOP. In the plan to be submitted to shareholders at the AGM on March 29th, VIB expects to use 1,975,500 treasury shares to award its employees. Last year, the bank’s shareholders also approved the plan to distribute bonus shares to employees at 0.4 percent of the charter capital, equivalent to nearly 23 billion dong.
Hochiminh city Development Commercial Joint Stock Bank (HDBank) is also approved by shareholders to issue 20 million shares under ESOP. Employees receiving ESOP shares are selected based on their dedication, seniority, and positions. The time limit for transfer is one year. However, so far, HDBank has not issued the above shares, and the bank said that the latest time is the first quarter of 2018.
In fact, the issuance of ESOP shares to employees at banks has been applied by many banks in the previous time, such as Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank), Asia Commercial Joint Stock Bank (ACB), or Military Commercial Joint Stock Bank (MB). According to experts, that is a very good policy to both help banks have more capital and retain talents. However, this method is only useful for the share owners in the context of high stock prices, good liquidity, and stable banking business activities, as at the present.
