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 [...]
ESOPs as a part of compensation strategy, have multiple objectives to achieve. These not only help in creating wealth for employees, but also, align employees’ objectives with the Company’s overall goal and help in retention. In the current dynamic business environment, it is essential for any organization to retain key talents in the eco-system. Retaining [...]
ESOP or Equity Compensations Plan, a mechanism to render ownership interest to Employees in an Organisation, is already a widespread practice in the Western world. In India, thanks to the growing start-up ecosystem, ESOP is steadily gaining the momentum and the required attention. ESOP, at its core is implemented to drive outcomes like retaining resources, [...]
Equity based compensation in any form or shape is relatively complicated to understand and also difficult to communicate. However, that precisely is the reason why communication is key to ensure its success. For good reason, globally companies earmark a significant budget for Plan communication. Communication in every form is crucial for the success of any [...]
ESOPs, broadly known as Equity based compensation, are often looked upon as variable non cash compensation in the Total Rewards strategy. Variable, because its value varies with growth in the business valuation. Non-cash, because any Equity based instrument, by default, is encashed through trading in the stock market. So the buyer of that instrument, not [...]
ESOP or any Equity based compensation instrument is more complex to understand than any other mode of compensation. At the same time, being a costly instrument, it needs to be used carefully. Simple answer to – who should be covered? is that give it to those who understand it and appreciate its value. This [...]
ESOPs get converted into Equity shares and result in dilution of existing shareholders’ ownership. In this context, how much Equity should the Promoters keep aside is a key decision while implementing any ESOP Plan. The decision needs to be evaluated keeping in mind viewpoints of both the stakeholders viz. promoters (existing shareholders) and the [...]
Context Companies grant ESOPs to employees with three major objectives, sharing wealth, rewarding performance and making them think like a shareholder (owner). Giving Equity as a part of compensation is a very costly proposition because cost of equity is far higher than cash pay-out. More and more companies are granting ESOPs, in spite of knowing [...]
