This document discusses employee stock option plans (ESOPs) as an increasingly popular form of employee retention and motivation. It notes that 63% of companies in India have or plan to implement an ESOP within 12 months. ESOPs allow employees to acquire company shares at a future date and predetermined price. They are intended to create a sense of ownership and motivate employees while improving shareholder value and creating wealth for employees. Senior management typically receives 50-70% of ESOP allocations, while middle and junior employees receive 30-50% and 0-20% respectively. The document provides examples of key ESOP terms and concepts.

1. EMPLOYEE STOCK OPTION
PLAN

2. Increasing Popularity Of ESOP
 Determining innovative retention program
 ESOP is one of the most popular employee retention and
motivation program
 In a poll conducted by Business world in India
63% companies have confirmed having an ESOP program
or planning to have one in next 12 months

3. Employee Stock Option Plan
 Employee Stock Option Plan (ESOP)
is a plan through which a company grants an option to its
employees to acquire shares at a future date and at a
predetermined price .

4. Objective Of ESOP
Sense of belonging
and ownership
amongst the
employees
Retirement
plan
Motivates the
employees
Improve
shareholders'
value
Wealth
creation for
employee

5. Whom to give ?
Senior
Middle
Junior
50-70%
30-50%
0-20%
ESOP
Allocation
Management
Structure

6. Incentive Mechanism
• Employee Stock Option Plan(ESOP)
• Employee Stock Purchase Plan (ESPP)
• Share Appreciation Rights (SAR)

7. Employee Stock Option Plan
A stock option is the opportunity, given by
employer, to own a certain number of shares of
your company's common stock at a pre-established
price, known as the grant price, over a specific
period of time, known as the vesting period.

8. Terms used in an ESOP
 Grant Date
 Option Price
 Vesting Date
 Exercise Period

9. Example
 Shenoy Solutions, an IT company.
 Has 100,000 shares currently priced at Rs. 10
 The company offers an employee Girish on
1st November 2008 (Grant Date ) , option of 1000 shares at
Rs. 10 (Option price), after two years (Vesting period).
 After two years i.e 2010, the price of the share is Rs.
40, and Girish exercises the option(Exercise Period) he
pays Rs. 10,000 and the company issues 1000 shares.

10. Salient Features Of ESOPs
 Employees can acquire shares at a pre-determined price
 Exercise of option plan is subject to vesting period
--- Minimum period of one year between grant and
vesting as per SEBI Guidelines
 Right to dispose of shares subject to lock-in-period as may
be determined by the company

11. THANK YOU