Question

The Economic Survey 2020 suggests Employee Stock Ownership for which sector?

• A. Manufacturing
• B. Banking
• C. Agriculture
• D. Infrastructure

Answer 1

The Correct Option is B

The Economic Survey 2020 suggested the implementation of Employee Stock Ownership Plans (ESOPs) specifically for the Banking sector. This recommendation was made in light of several challenges faced by the banking sector, particularly regarding the management of human resources and aligning the interests of staff with that of the banks' stakeholders.

The rationale behind promoting ESOPs in the banking sector is as follows:

• Alignment of Interests: ESOPs align the interests of employees with that of the bank's performance. Employees who own stock in their banks are more likely to act in ways that increase the value of their shares.
• Incentive for Employees: Enabling employees to own shares in the bank serves as a motivational tool, encouraging them to work harder and be more productive because the bank's success would directly benefit them financially.
• Attracting and Retaining Talent: In a competitive job market, ESOPs can be an attractive feature for potential recruits and help retain existing talent by offering a tangible stake in the bank's future.

These factors are particularly pertinent to the banking sector which requires a motivated and invested workforce to efficiently manage resources and respond to sector-specific challenges.

Let's briefly examine why the other options (Manufacturing, Agriculture, Infrastructure) were not the focus for ESOPs in the Economic Survey 2020:

• Manufacturing: The sector has other financial and structural incentives and challenges distinct from primarily stock ownership considerations.
• Agriculture: The issues in agriculture are typically centered around small farm sizes, subsidies, and rural infrastructure, which are not directly addressed through ESOPs.
• Infrastructure: Infrastructure projects often rely on large scale funding and government involvement, where the key strategies differ from ownership incentives.

Thus, the recommendation for ESOPs was considered most relevant and impactful in the banking sector given its unique human resource dynamics and the need for alignment of employees' and banks' performance incentives.