A Stock option (“ESOP”) is a derivative of the underlying equity share and hence any change in the value of the share has a direct impact on the value of the ESOP. In any corporate restructuring event such as merger, amalgamation, demerger, acquisition, etc. (“M&A”), the shareholders of a participating company are compensated through a [...]
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ESOP (Employee Stock Option Plan) as a term has been widely heard and used by Corporates, Professionals and Employees, but hardly understood well as a concept. Here, we intend to explain the basic concept and break down the wide term of ESOP. Going by the nomenclature – it is evident that it is an Employee [...]
ESOPs are used to motivate employees and give the feel of "ownership." The process does not end with handing over Grant letters to employees; it actually starts there. Moreover, ESOPs are a long-term instrument, and it is essential to engage the Option holders, handhold them, and keep them informed about the Plan and its performance. [...]
Employee stock options (‘ESOPs’ or ‘Options’) [we have used ESOPs as a common term for various equity-settled instruments] are very common instrument for sharing wealth generated by employees, by way of compensation. Like any other salary component, ESOPs are also taxed as regular income upon exercise and long-term capital gains (‘LTCG’) or short-term capital gains [...]
One of the key concerns of existing Investors, including Promoters is dilution. Dilution occurs when a company allots new primary Shares. In case of ESOPs, dilution can occur in two ways: In the % shareholding of existing Investors, at the time of issue of new equity shares on exercise of Options; and In the form [...]
Should ESOP Plans provide for giving liquidity / enable encashment to employees? If so how and when?
The Backdrop Employee Stock Options are the most popular instruments in attracting, retaining, and rewarding employees. More and more private companies are using it to match employee expectations thereby making the overall compensation attractive. Thus, on one side, it helps the private companies to conserve cash which they need for their sustenance and competing with [...]
The pricing, as they say determines the success or failure of any product and so is for Employee Stock Options (ESOPs). Pricing of ESOPs termed as grant price/strike price/base price/exercise price depends upon basic objective(s) of the Company granting the options. It also depends upon various parameters like who is the proposed grantee, past performance, [...]
Broadly speaking, an Employee Stock Option (“ESOP”) Scheme is an embodiment of objectives, guidelines and rules. A note worthy thing in respect of ESOP is that it is a regulated instrument whether one talks about a listed or an unlisted company at whatever stage of business. If one starts to identify the key components of [...]
Stock Options or ESOPs, as used in a generic sense, is a very effective tool to retain key talent in the Company’s ecosystem. It not only assists the employee to create wealth for himself, but also, helps in aligning the individual objectives of the employee with Company’s overall goal. Having said that, while implementing [...]
How does one measure whether ESOPs are working? ESOP is a tool for creating ownership and wealth creation for employees. ESOP envisages a right given to the employees of a Company to get shares at a predefined price and over a predefined period. Primary objectives of ESOP’s implementation are to ensure long term commitment of [...]