The provision to provide a seat to the employee's representative on the board of directors of the State Owned Enterprises (SOEs) under the Benazir Employees Stock Option Scheme (BESOS) would ensure smooth privatisation of government entities.
Talking to Business Recorder on Tuesday, Sartaj Aziz, an eminent economist, said Privatisation Commission's plan to induct an educated person as the representative of workers on the board of directors of the SOEs was a positive step.
"The employees should be given their due share in the privatisation of the government entities. As workers have not enough funds to purchase shares, it is the right step of the government to give them 12 percent free of cost shares. However, the mechanism for implementation of the BESOS would further clarify the process in future. It depends on the performance/profits of any state owned entity to determine its market value," he added.
Brokers/members of the Islamabad Stock Exchange (ISE) opined that the unions and employees of the government entities being privatised usually create hurdles during privatisation process. For example, OGDC employees strongly protested against privatisation of Qadirpur Gas Field. The same situation was witnessed in other cases like PTCL where strong resistance was witnessed during the privatisation of state owned entities.
The Privatisation Commission (PC) has chalked out a scheme called "Benazir Employees Stock Option Scheme (BESOS)" wherein employees of State Owned Enterprises would be transferred 12 per cent GoP shareholding along with a seat on the Board of the unit.
Employees' shareholdings through transfer of 12 per cent of the federal government will entitle them membership of the board of directors. Under the scheme, employees' representative on the Board to be nominated by GoP through line Ministry/Holding Corporation on the recommendation of Trust of the BESOS.
Such representative would be a Chartered Accountant or a Corporate Lawyer or an eminent professional having minimum professional experience of 15 years or, a senior government official not below the status of a Joint Secretary.
Brokers claimed that the presence of SOEs employee on the board would provide support to the privatisation programme of the government. When the representative of the employees would be present on the board, it might facilitate the interest of privatisation process. It would also prevent any kind of agitation or negative campaign against the privatisation of state owned entities.
Broker's community of the ISE has further suggested sale of 12 percent shares of the SOEs to their employees under the BESOS through stock exchanges. They were of the view that the scheme envisages the empowerment of the employees of the state owned entities through BESOS. Government employees will now be the shareholders of up to 12 per cent in as many 86 government enterprises.
However, it would be more appropriate to sell these shares through stock exchanges or Global Depository Receipts (GDR). The government should take some token money from those employees who intend to acquire shares of the SOEs. The sale of these shares through stock exchanges would generate revenue which will assist in retiring the SOEs debt.
The shares should be sold on discount price, but not free of cost, so urged many analysts. According to rough estimates 12 percent shares would net billions of rupees to the SOE. "It is the government's prerogative to give free shares to employees to facilitate them. Otherwise the book value or market value of shares would need to be carefully considered," brokers added.
Under this scheme, workers would get shares amounting to over Rs 100 billion and initially five hundred thousand workers of eighty institutions would be benefited through this scheme. Privatisation Commission Ordinance 2000, section 2 (i) defines "privatisation" as a transaction by virtue of which any property, right, interest, concession or management thereof is transferred to any person from the federal government or any enterprise owned or controlled, wholly or partially, directly or indirectly, by the federal government". Accordingly the BESOS scheme falls under the privatisation law.
One of the salient features of the BESOS is the empowerment of employees of SOEs/ other GoP shareholdings through transfer of 12 percent of the GoP shareholding and a seat on the Board. All permanent and contractual employees (with minimum service of five years) are eligible for the BESOS and would only be allowed to exit on retirement, or when they cease to be employees of the SOE. Twelve percent of the GoP shareholding will be transferred for free.
SOEs will create a Trust for BESOS with token cash. The Board of Trustees will consist of government nominees and employees' representatives. The GoP would guarantee the buyback of the surrendered units on the basis of market value of the listed companies, break-up value at historical cost based on the last audited financial statements excluding re-valuation reserves for the un-listed and private limited companies and on net-worth based on the last audited financial statements excluding revaluation reserves for SOEs established under Special Acts and Ordinance till such time as they are corporatized.
Trusts would be entitled to receive dividends, if any, from the date of applicability of the BESOS, the sources added. Sources said 50 percent of the dividend would be transferred to central revolving fund for annual payout and 50 percent would be distributed amongst the employees. This would result in an annual payout of Rs 1.670 billion which would be funded by GoP. A central revolving fund out of the future dividend would be established in the Privatisation Commission for payments against surrendered unit certificates.
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