Indian companies engaged in the IT software and IT services, would now be entitled to issue ADR/GDR linked stock options to the permanent employees (including Indian and overseas working directors) of its subsidiary companies incorporated in India or out of India and engaged in IT software or IT services subject to to the eligibility criteria and other parameters announced earlier, the release said.The decision has been taken keeping in view the essential features of the relationship between the parent company and subsidiaries such as staff movement between the parent and subsidiary companies, interlinkage of the parent and subsidiary companies and complementarily of the functions between the two.

The Government had been considering expansion in the coverage of employees who would be entitled to the Esops in line with the Sebi guidelines on Esops which covers employees of a subsidiary company for the purpose of Esops.Infosys was the the first company to issue ADR-linked stock options which score over the plain-vanilla version in two ways. First, for employees stationed abroad, they are easier to keep track of, and also cash in.

Second, for a few companies like Infosys, their Nasdaq shares have been trading at a significant premium to domestic stock prices.The ADR-/GDR-linked stock options is becoming important as Indian software companies are positioning themselves as global players. Just paying high salaries has proved less than successful in retaining skilled talent because there are always people abroad who are willing to pay even more for skilled Indian software engineers.The worry an Indian company had while posting people abroad was that some bright Continued on Page 10Centre allows ADR-,GDR-linked staff options for local IT firms' subsidiariesemployee might decide to give up their stock option if he was being offered a job with an American company that also offered stock options.

For software engineers planning to stay on abroad, it made much more sense to choose a dollar-denominated option over a rupee-denominated one. But the new ADR/GDR linked stock option has successfully addressed this problem.With Indian stocks listed abroad ruling at high prices and price-earning multiples, this option can be used as a powerful bait for attracting fresh talent.