Employees’ shareholding: An emerging practice for motivation

A company is going public, its shares are being traded on bourses.

But, that is none of its employees' concern, since they barely own company shares in Bangladesh.

The Bangladesh Securities and Exchange Commission (BSEC), is now trying to get onboard company employees into the stock market journey of the firm they work for, like in many other countries.

The capital market regulator on Sunday allowed three companies – Union Bank, Union Insurance, and BD Thai Food and Beverage Ltd – to issue up to 15% of their primary shares to their own employees.

The practice is present across the world. Ownership rightly motivates employees to give their best for the company so that shareholders' value maximises, said Professor Shibli Rubayat-Ul-Islam, chairman of BSEC.

"We expect that having the ownership, employees of listed firms will serve their shareholders' interest better," he added.

The primary shares subscribed by company employees will be locked in for two years from the debut in the secondary market, BSEC said, while the other pre-IPO shareholders, including the sponsors, have to wait at least three years to put a sell order for their shares.

Earlier, multinational telecom operators Grameenphone and Robi Axiata allowed their employees to subscribe to their company shares before the initial public offerings (IPOs).

This is a positive move to tag the fate of company employees and shareholders, said Md Moniruzzaman, vice-president of Bangladesh Merchant Bankers Association (BMBA).

In developed markets, top executives are often offered company shares as performance bonuses, or stock options that allow them to exercise their right to own or sell company shares after serving the company for a period.

And thus, the company's prosperity directly becomes the executives' fortune, he added.

If a company performs better, its shares tend to be priced higher in the stock market and vice-versa. 

"We observed, executives of many well-performing non-listed firms are reluctant to see their company going public," said BSEC Executive Director Rezaul Karim.

It is because stock market listing imposes a new layer of compliances and most importantly, the executives barely find it profitable for themselves, he feels.

"This is a reality, people work mostly to maximise their personal wealth."

If the employees of the three firms do not subscribe to the entire 15% of the IPO shares, the regulator would allow the unsubscribed portion to be offered to the public, Rezaul Karim said.