What is the downside of implementing ESOPs
- For unlisted companies, it is the lack of liquidity
- For listed companies, they have the disadvantage of having their stock price movements not being in sync with the companies’ performances.
- Other hygiene factors are not in place – communication, transparency, objectivity
- Design flaws – vesting conditions, exercise process
“A plan should consider interest of all vested parties “
Misconception: Very often, people fear that by establishing an ESOP, they will lose control over their company. It is not so. On the contrary, ESOPs motivate employees to think like the owner of the company, wherein the control remains with the actual owners.