Paytm may be circumventing regulation to grant employee stock options to founder and Chief Executive Officer Vijay Shekhar Sharma, according to proxy advisory firm Institutional Investor Advisory Services.
While Sharma isn’t classified as a promoter — Indian parlance for controlling shareholder — he has rights akin to one, including a potential permanent seat on the board, IiAS said in a note Friday. “These provisions and structures give Vijay Shekhar Sharma ‘entrenchment’ similar to that enjoyed by promoter families in the more traditional companies,” IiAS said.
It added the regulator must examine Sharma’s move to pare his direct stake by transferring equity to a family trust, barring which he wouldn’t be eligible for the Employee Stock Option Plan.
Indian law prohibits stock options to promoters, and to directors who directly or indirectly hold more than 10% of the firm. Scrutiny over pay has also increased after Paytm sank 75% since its initial public offering last year, following which Sharma in April said his stock grants would vest only after the company’s market capitalization exceeded the IPO level on a “sustained basis.”