Very few public investors had sufficient grounds to evaluate and fully understand the advantages and disadvantages of this form of share issuance. Meanwhile, the Employee Stock Ownership Plan programmes (ESOP) of some banks usually focused on senior officials.
Talent retention
According to the plan submitted to the general Meeting of Shareholders (AGM), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) intended to sell 4.76 million TCB shares to its employees under the ESOP programme for 10,000 dong per share. This price was less than half of TCB’s market price at the moment. The expected issuance date was in Q3-Q4/2020; the Board of directors would decide the specific time as an authorised unit. Notably, additionally issued shares were not transferable. If these shares were issued, Techcombank’s chartered capital would increase from 35.001 trillion dong to 35.049 trillion dong. The proceeds would be supplemented with equity for the bank’s operation.
This had been the 3rd consecutive year that Techcombank had issued ESOP shares. Specifically, in 2018, Techcombank issued nearly 14.7 million ESOP shares. In 2019, the bank issued more than 3.5 million ESOP shares, with the selling price of 10,000 dong per share, accounting for 0.1 percent of the total number of TCB shares in circulation. The total issuance value was over 35 billion dong.
Recently, at the AGM, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) also planned to issue 17 million ESOP shares, with an estimated selling price of 10,000 dong per share from treasury shares. The amount expected to collect 170 billion dong. In this ESOP programme, employees were entitled to buy treasury shares at preferential prices, provided that the number of shares purchased would be blockaded (transfer restricted) for a maximum of three years from the end of the selling course.
However, the Board of directors proposed to decide to loosen the specific transfer restriction time depending on the personnel policy in each period, but not exceeding the following maximum ratio: maximum 30 percent after one year, 35 percent after two years, 35 percent after three years. As explained by VPBank, the issuance of ESOP shares to officials and employees was to retain talents and recognise the contributions of all employees of this bank.
The representative of Techcombank shared that the purpose of issuing ESOP shares to employees was to attract, encourage, and retain competent staff to continue working and contribute to the bank long-term.
Reward seemed not to be equally divided
According to experts, ESOP was for evaluating and quantifying the effectiveness, effort of employees. However, from the business release of ESOP in recent years, investors could base on some criteria to assess the capacity, transparency, and reasonableness of using this tool.
In fact, the ESOP programmes of some banks often focused on senior staff. As in the case of VPBank, at the end of 2019, the bank announced that all 31 million VPB shares were distributed to 725 employees at the price of 10,000 dong per share, equivalent to the successful offering ratio of 100 %. In particular, general director Nguyen Duc Vinh bought 16.4 million shares, accounting for 53 percent of the offering. After the transaction, Vinh owned 32.4 million shares, equivalent to 1.28 percent of the bank’s charter capital. Earlier, in 2019, VPBank also issued 33.7 million ESOP shares. Nguyen Duc Vinh was still the most significant buyer with 15.55 million shares.
The ESOP share offering at par value (10,000 dong per share) was considered a valuable gift for bank bosses. The stock market price of the banks implementing ESOP programmes was much higher than the price offered. For example, the current market share price of Techcombank was 20,900 dong per share, while VPBank was 22,850 dong per share.
Therefore, the ESOP programmes had recently met with the reaction of some shareholders to the skepticism that the bank’s money was flowing into internal private pockets through the ESOP path?
Evaluating the stock bonus policy for bank staff, key officials, a shareholder commented, this was considered a ‘carrot’ of many businesses today. While employees were excited, many shareholders were scared because when issuing more shares, the value of the stock would be ‘diluted.’ Hence, when some companies announced this programme, the stock price would draw a downward line.
