China mulls over plan on employee stock ownership

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According to the draft released by China's securities regulator, an employee stock ownership plan (ESOP) allows listed firms to buy their own stocks on the secondary market through an assetsmanagement agency with a designated part of their employees' cash compensation. [File Photo]

China Securities Regulatory Commission on Sunday issued a draft regulation for listed companies that offer shares to their employees, aiming to make more staff benefit from stock ownership.

According to the draft released by China's securities regulator, an employee stock ownership plan (ESOP) allows listed firms to buy their own stocks on the secondary market through an assets management agency with a designated part of their employees' cash compensation.

Employees can participate in the plan on a voluntary basis, and get share entitlements according to a distribution agreement, said the draft, which is open for public opinions till Aug. 17.

The ESOP, which will help increase efficiency and comprehensive strength of a listed company, is a widely-employed mechanism in mature securities market. China had previously introduced plans that encouraged only senior executives to own stakes in listed companies.

According to the draft, the fund drawn from an individual worker should be no higher than 30 percent of his past 12-month cash compensation, which include salary and bonus, and in the meantime less than one-third of the employer's household financial assets.

The stocks have to be held for at least 36 months, the draft said.

The ESOP fund can hold no more than 10 percent of the stake in a listed company, and an individual worker can only have less than 1 percent stake, according to the draft.

The draft also states that listed companies should strengthen insider information management and entrust ESOP fund to an independent and eligible assets manager.