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L&T extends ESOP to senior managers

Our Bureau

MUMBAI, July 26

LARSEN & Toubro Ltd (L&T) has extended its employee stock option plan (ESOP) to cover 500 employees -- all in the senior management cadre.

Speaking to Business Line here today, Mr. A.M. Naik, CEO, said the ESOPs have been priced at Rs. 184 per share and the scheme is effective from June 1, 2000. According to him, the L&T board had empowered the Compensation Committee (CC), set up in June 19 99 and consisting of three non-executive directors, to decide on the ESOP pricing and the effective date of the scheme.

The committee had, accordingly, ratified the pricing (Rs. 184 per share) and the effective date of the scheme (June 1, 2000) on May 19, 2000. Referring to reports on July 4 being the effective date for the ESOP, Mr. Naik said since the board of directors was informed about the details of the scheme only at its meeting on July 4, 2000, it was wrongly construed to be the effective date of the ESOP scheme.

As per SEBI guidelines, the board-approved Compensation Committee is empowered to take a final decision on the pricing and the effective date of the ESOP scheme. ``There is no need for a board approval after the CC has ratified the scheme'', a company of ficial confirmed.

Mr. Naik said the company will not be required to make any loss provision in its profit and loss (P&L) statement as the ESOP price is similar to the market price as on June 1. Under the ESOP scheme, if a company prices its ESOPs at a discount to the mark et price (prevailing on the effective date), the differential will have to be charged to the P&L statement.

Mr. Naik said the company had shifted from its stock appreciation rights (SAR) scheme to ESOP scheme in the current fiscal as the former entailed a huge hit to the P&L, if the scrip price fell sharply. In the case of SAR, the amount of appreciation is gi ven to the employee in the form of shares at the market price on the date of exercise. The employee pays Rs. 10 per share being the face value.

Mr. Naik said the ESOPs will be awarded based on the performance of each employee and the scheme is basically an incentive to retain talented manpower. ``We have lost some 500 people over the past one year due to poor compensation as compared to other i ndustries'', he said.

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