Transaction Ban on Employee Stock Plan to be Reduced

The Ministry of Finance and Economy will prepare a remedy for the employee stock ownership plan, according to President Kim's announcement to reduce or abrogate altogether the current prohibition period on transactions of employees owning stock.
The employee stock ownership plan currently distributes 20 percent of new share offerings to employees, but employees are not permitted to sell the stock for seven years except during certain situations such as retirement, marriage, or buying a house.
The ministry plans to assess the feasibility of reducing the prohibition period to three or five years rather than outright abolition. It will put the new regulation into effect from the latter half of this year after revising the Securities Exchange Law and holding a public hearing.
A source in the ministry explained, 'If the prohibition period is suspended, the equity of general stockholders will in effect be reduced, comparitively, because employees who buy company stock have numerous benefits including tax reductions. Therefore we plan to shorten the period prohibiting employees to sell the stock purchased in a company stock plan to secure a better exchange of money.'
Under this system, introduced in 1968, 1.3 million workers in 1,007 unions own 270 million shares as of the end of March this year.
However, the ministry decided to leave the introduction of the employee trust ownership plan as a long-term task due to premature planning. According to this proposed system, a company gives stock to employees who in return deposit it back into the company's fund. Employees then can draw from the fund as a pension upon retirement.
Jooan Kang : jooan@joongang.co.kr