The Hindu Business Line : ‘Nominated board directors can take part in stock options’

Mumbai, Aug. 5 A director nominated by an institution as its representative on the board of directors of a company is eligible to participate in the Employee Stock Option Scheme (ESOS) of the company, SEBI clarified in a circular on Monday.

This is provided that the contract or agreement entered into between the nominating institution and the director specifically provides for acceptance of ESOS and that a copy of it is filed with the company, SEBI said.

This issue was under debate last year when LIC and GIC had sought legal recourse to restrain their nominee directors on the board of Larsen & Toubro from dealing in the stock options allotted to them. Their argument was that the directors were their representatives and could not deal in stock options in their individual capacity.

Their nominee directors had stock options worth crores of rupees which they had secured at a discounted rate of Rs 35 per share while the ruling market price then was around Rs 1,700.

Currently an employee of a company (including a director) is eligible to participate in the ESOS of the company, if such an employee is not a promoter, does not belong to the promoter group and is not a director, who either by himself or through his relative or any corporate body directly or indirectly holds more than 10 per cent of the outstanding equity shares of the company, SEBI said.

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