Chennai: The Murugappa Group, a family-owned business conglomerate that ended 2006-07 with over $2 billion (Rs8,100 crore) in revenue, has decided to issue employee stock options across all major companies under its control in a bid to tackle attrition. This is the group’s first such initiative.
The issue of shares to the employees is expected to help the 107-year-old Chennai-based group—it has interests in areas such as engineering, abrasives, sanitaryware, fertilizers, finance, bio-products and plantations—to attract and retain talent.
The move will also help Murugappa group to offer attractive compensation packages.
“The employee stock option plan (Esop) will be given to senior employees and those whose roles are deemed as critical to the company,” said a top official of the group who did not wish to be identified. “The main aim of Esop is to reward talent within the organization,” the official added.
All major listed companies belonging to the Murugappa group announced last month that they would seek shareholder approval to allot a maximum of 5% of their equity capital under Esop.
The only exception was Parry Agro, a tea producer that also holds the group’s investments in other group companies.
The decision to allot equity shares was taken by Murugappa corporate board, which governs the group but does not have direct control over the group companies. A family member, M.A. Alagappan, heads the board.
After receiving approval from shareholders, compensation committees from each company will discuss the modalities of issuing the stock options, and also determine the ‘criticality’ of roles, said the official.
Murugappa group has 29 registered companies, including Cholamandalam DBS Finance, Parry Agro Industries and Coromandel Fertilisers. Fertilizers and engineering products accounts for around 70% of the group’s turnover. Fertilizers alone contribute 46% of the group turnover, which grew by 15% last year to Rs8, 446 crore.
“They do not have a choice even in a traditional set-up,” said Hemalatha Rajan, director of Ma Foi Management Consultants Ltd, an HR services firm. “It is very difficult to retain or attract talent unless they (companies) bring in innovative salary structures,” she added.
With the stock market booming, Rajan said that stock options were back in vogue among employees as an incentive and compensation tool. “At the entry level, people like to work in good manufacturing companies, but after gaining experience, they like to move out,” she said.