In one of the
fastest corporate takeovers in India’s business history,Satyam Computer
Services Ltd’s ownership has been passed on to Tech Mahindra Ltd. The
new owner, in right earnest, has infused the required funding in the
business and also made a public offer for acquiring a 20% stake from
minority shareholders, thereby conveying the seriousness of its intent
to bail out the troubled company and provide comfort to anxious
employees.

An
issue which has so far not been discussed, at least in the public
domain, is what happens to the millions of employee stock options, or
Esops, granted by Satyam to its employees, and which have not been
exercised by them either because they are yet to vest or the market
price was not attractive.

Among the top information
technology companies, Satyam has been granting Esops to its key
employees regularly since 1999 and is believed to have implemented
successful plans which have benefited the employees as well as the
company. It has been acknowledged even by the top management of Tech
Mahindra that human resources integration would be the key to
successful integration of the two companies. Retention of key Satyam
staff would be critical in not only ensuring smooth transition but also
adhering to the strict delivery timelines, ensuring quality of
deliverables and in retaining clients. As in any people-oriented
business, stock options have been central to employee motivation and
retention at Satyam.

Satyam’s latest annual report gives the status of its Esop plans.

Purely
from the legal perspective, the treatment to Satyam options would
depend on the nature of integration Tech Mahindra has in mind. If it
decides to merge the two companies (looks like a remote possibility
given the unknown liabilities of Satyam) or if only the business of
Satyam was to be merged with Tech Mahindra, the options holders will
have to be either offered Tech Mahindra options or have the accelerated
vesting, make the employees exercise them and offer Tech Mahindra
shares as a part of the share-swap ratio. All the schemes of Satyam
Esops provide for this mechanism in case of a merger or sale of
business, and the rights of the option holders are fairly well
protected.

http://www.livemint.com/2009/05/31212431/How-to-leverage-Esops-for-Saty.html