THE EMPLOYEE STOCK OWNERSHIP PROGRAM PHENOMENA: EVIDENCE FROM INDONESIA

The objective of this study is to explain the employee stock ownership program phenomenon in public companies in Indonesia. The ownership of companies in Indonesia is concentrated by a single controlling shareholder. Sometimes, the board of directors and board of commissioners of a company or his/her family are the controlling shareholders. This study is interested in describing the employment stock option program phenomenon. This study collects data from the Indonesian Stock Exchange database of companies conducting employee stock ownership programs. There were 45 companies conducting this tye of program between 1999 and 2011. In 2011, the number of public companies listed on the Indonesian Stock Exchange was 451. This implies that about 9.97 percent of public companies conduct such a program. Why is it then, that more companies do not use this program? Almost 33.56% of public company directors in Indonesia are the family of the controlling shareholder. Therefore, he/she feels that this program will not have any impact on the manager because the manager has the same interest as the controlling shareholder. Thus, the program is not attractive in Indonesia as a way to reduce the agency problem between shareholders and manager. It is only relevant for public companies with dispersed ownership.