EFFECT OF EMPLOYEE STOCK OPTION PLANS (ESOPS) TO PEFORMANCE AND FIRM VALUE : EMPIRICAL STUDY AT JSX




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    EFFECT OF EMPLOYEE STOCK OPTION PLANS (ESOPS) TO PEFORMANCE AND FIRM VALUE : EMPIRICAL STUDY AT JSX

    Azwar Anwar

    Zaki Baridwan

    1. INTRODUCTION

    1.1 Background

    Conflict of interests may be happen between owners or shareholders and mana-gement, between majority and minority shareholders, either between majority share-holders and bondholders. Conflict of interests may influence performance and firm value. One of many way to mitigate conflict of interests between owner and man-agement is applied Employee Stock Ownership Plans.

    In 1950s’, a lawyer and investment banker, Louis Kelso said that capitalism system will be stronger if the employee joins the firms’ stock ownership. In United States, Employee Stock Ownership Plans (ESOPs) is a kind of pension program which was designed for achieve firms’ contribution by fund managing. It will do an investment to firm stock for employee. This was an employee stock ownership plans which was formulated by Kelso. In the great line, there are three models or tools from employee stock ownership participation in the firm, they are employee owner-ship by direct purchase plan, giving option to employee for purchasing firm stock (stock option plans) and fund management programs (trust) was designed for in-vestment. Otherwise, growing of stock ownership plans application in Indonesia fol-lowing by research of ESOPs Application Study Team for emitting in Indonesia (2002) which formed by BAPEPAM are:

    a) Before 1998, ESOP which is applied by companies in Indonesia, in the early growing, was forming a stock allocation when companies “go public”. In this case, we may call a “stock allocation scheme.” At the initial public offering, the employee get subside or lending which is guaranteed by company.

    b) In 1998 – now, the stock ownership growing about was advanced by employee, other side fixing allocation public offering 10%. Then, likely an option program, which nor before or other after company do public offering (go public), employee is given warrant which can do to purchase stock with certain price and certain pe-riod at the next time.

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