Employees in PSBs are paid in fixed salaries all these years which according to the Survey does not encourage risk-taking and innovation. These banks which control 70% of the market share in Indian banking, lag considerably in performance metrics when compared to their peers. Economic adviser Krishnamurthy Subramanian and his team have proposed skin in the game for public sector bank (PSB) employees through the employee stock ownership plan (ESOP).
Ownership by motivated, capable employees across all levels in the organization could give such employees tangible financial rewards for value enhancement, align their incentives with what is beneficial to the PSB, and create a mindset of enterprise ownership for employees. Employees can constitute one of the blocks of new owners of PSBs through ESOP that is conditioned on employee performance.
This would enable employees to become owners in the banks and incentivise them to embrace risk-taking and innovation continually.
An ESOP, on the other hand, will reward only good performers. The survey said that a portion of the government stakes can be transferred to employees exhibiting good performance across all levels of the organisation.