ESOP Direct

Employee Administration Practices 2002 Survey

We have been consistently following the developments and trends in the field of ESOPs. In the recent past we published India's first survey on ESOP Designing Practices 2001. This was followed by a study on another contemporary issue of Underwater 0ptions.

In continuation of these studies, this time we are looking at a subject that has been relatively ignored by the Indian companies, Administration of ESOPs.

We would like to present to you the Overview and Highlights of this survey. Please read on to know some of the interesting findings from this survey. .

In case you need access to the complete Survey report please write to


World over companies earmark significant budgets for administration and communication of Stock Option Plans to the employee. Specific resources are earmarked and funds allocated, several companies also recruit professional agencies to draft employee communication material, independently administer the Plan, advice employees on Taxation, etc. Conscious efforts are taken to make the Plan implementation employee-friendly. In order to make the function more responsive and focused, alternatives like use of software, outsourcing, use of Internet/Intranet are being widely evaluated and implemented.

How are Indian companies addressing all these issues@f0 Do they give enough importance to this function@f1 Are they committing or willing to commit adequate resources to leverage on this incentive being offered to the employees@f2 Are they willing to involve the employees in the whole process by being transparent and encouraging employee interaction@f3

Purpose of this survey was to gather and interpret company responses on these issues and present a trend to the participating companies. A side objective was also of creating awareness about several smaller but significant issues that would go a long way in efficient and effective implementation of ESOPs.

Design of the survey

The survey covers five broad topics basic data about ESOPs in companies Communication, Specific administration functions, MIS & Reporting and Outsourcing.

Basic information about the ESOP schemes in the company

We have started with some basic information about the Plans in each company. Here we have looked at duration for which the Plan has been implemented, coverage of employees (domestic and overseas); functional departments primarily responsible for the administration, etc. This chapter gives a good overview of the status of ESOPs in this segment of companies.


We believe that it is time Indian companies start looking seriously at the communication issues. Just as the employees tend to do, companies cannot ignore the Stock Option plans when they are not attractive or are underwater. In fact that is the time when they need to be more communicative with the employees, explaining them the long-term nature of this instrument.

Specific administration functions

There are several finer issues in administering specific functions such as Grants, Exercise, Separation, etc. which need efficient management and processes. Some of them also have legal implications such as obtaining consent of the employees on the grant agreement.

In practice we also see some confusion about who should be responsible for this function, whether it is HR or Finance or Legal@f4 We have taken a look at this trend.

Generating Management reports on ESOPs is another area, where we find executives spending enormous time, simply because they do not have data compiled in a suitable form. We have looked at what kind of reports do they need, how do they generate them, etc.

Use of technology in administering ESOPs is an area where we feel awareness needs to be created, especially given the international trends in this area. We have looked at the practices followed by the companies.


World over ESOP administration is considered a specialized function and is typically handled by professional service providers. Other linked services such as on line trading in shares, on-line banking etc. are also offered by these agencies. In India with more and more laws coming in force, companies need to be more vigilant about the statutory compliances. At the same time they need to be more responsive to the needs of the employees. What do companies feel about this@f5

What is there expectation from the service providers, if at all they desire to outsource the function@f6

Survey questionnaire spread over five chapters covered around 90 questions. Summary of responses for each question is provided in the following chapters of the report.

Profile of the participating companies

We have always been fortunate in receiving very encouraging response to all our surveys

29 companies responded to this survey and their profile covers all the categories of companies.

Around 70% of the companies were listed on Stock exchanges and around 60% belonged to the Information Technology sector.

In the non-IT sector the companies represented diverse sectors such as Banks, Telecom hardware, Pharmaceuticals, Auto manufacturers, financial institutions

In terms of size we have companies with as less as 50 employees covered and also as many as 10,000 employees covered. Around 60% of these companies have granted options to their overseas employees.

Interestingly, we have two companies who are listed only on the NASDAQ and not in India.

The participation is wide and truly representative of the complete spectrum of companies who have implemented ESOPs.

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