Bank of China and China Construction Bank, two of China's top four commercial banks, will initiate employee stock ownership plans in the near future as part of their employee incentive programmes.

"The bank's board of directors has approved the employee stock ownership plan," the 21st Century Business Herald quoted Zhu Min, assistant president of Bank of China, as saying yesterday.

Zhu said the plan was also supported by the government regulator, but the specific operation method has yet to be decided.

Guo Shuqing, chairman of China Construction Bank (CCB), revealed in a recent interview that the bank's employee stock ownership plan is likely to be implemented before the end of this year.

The bank said in a statement on Monday that the general meeting of shareholders approved its employee stock ownership incentive plan, as well as a stock appreciation rights policy for the management team in August 2005.

"The specific plans are now under internal and external approval procedures," it said.

"The implementation of such plans is to increase the bank's cohesion, to harmonize benefits for employees and shareholders, and to reduce the bank's operational risks."

"We expect to build up our core competitiveness by attracting more talent and improving innovation through the employee incentive programmes," the bank said.

Earlier media reports said CCB will allow its employees to hold 1 to 2 per cent of its total shares, which means each staff member will be able to buy 52,000 yuan (US$6,500) worth of stocks on average, according to the bank's current market value on the Hong Kong stock exchange.

The 300,000 employees will be able to hold around 4.5 billion shares, with a total market value of HK$15 billion (US$1.95 billion).

However, the bank said the amount of shares its employees could buy in the first year has not yet been decided, but will be much lower than media estimates, because employees would take part in the plan phase by phase.

"For a long-term view, the employee stock ownership plan will benefit these State-owned commercial banks in terms of improving corporate governance and shareholding reform," said Li Yongsen, a professor with Renmin University of China.

In May, Zhou Xiaochuan, governor of the People's Bank of China, encouraged State-owned financial institutions to adopt employee stock ownership plans for the first time.

"The employee stock ownership plan is an important part of financial institutions' joint stock reform," Zhou said earlier.