ESOP – Employee Stock Options

If your Organization desires to align the objectives of employees to that of the shareholders, there is no better motivator than a professionally designed ESOP or Employee Stock Ownership Plan.

ESOP or Employee Stock Options is a benefit that treats the employee as a shareholder and offers ownership interest in the company. It is a method to allow employees to buy stock in closely held or listed companies and motivates them to working towards higher revenue, higher profits and thus a higher stock value for the company.

Origin Consultants design an ESOP – Employee Stock Option Plan for their client companies keeping the relevant organization objectives and employee benefits in mind.

The Purpose of ESOP which could be one or more of the following:

  • Organization Culture
  • Succession Planning
  • Profit & Risk Sharing
  • Employee Retention
  • Long Term Incentive
  • Performance Bonus
  • Employee Benefit
  • Employee Wealth Generation
  • Remuneration Component
  • Hiring Bonus

ESOP Quantum Allocation and Rationale

Setting an ESOP framework which is transparent and clearly defines the who, why, how much and when of employee stock allocation. Origin Consultants believe that good governance is imperative for all companies, whether large or small. Thus, the ESOP allocation guidelines are designed keeping good governance practices for the benefit of your employees and your organization.

Vesting Period of Stocks

We are all aware that employees can get their shares if they put in a certain duration of continued service since the date of allocation. How many months / years for what grade and level must be defined in the ESOP framework?

Type of Stocks

The management must decide what stocks option plan will the organization offer to which employees. Types of Stock Plans generally preferred by organizations include Employee Stock Option Scheme (ESOS), Employee Stock Purchase Plan (ESPP), Restricted Stock Units (RSU), Stock Appreciation Rights (SARs), and Phantom Stocks.

Upfront Cost and Exercise Price of Stock

It is important that the Management decides whether it will give the Stock Options to the employees for free or at a price. Will the price be a certain percentage the market price or be defined based on the companies net worth? Will it be the same price to all employees, or will it vary as per their grade or band? If the employees do not have the funds to buy the stocks will they be funded by a third party for the same? How is the buyback price determined?

Origin Consultants helps you design an ESOP – Employee Stock Options Plan that is beneficial for Employees and the Organization.