Esop in India

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1.Introduction
Equity is being issued to Whole Time Directors, Officers and Employees of the Company through different stock-based plans. These plans are being offered to employees of a company, with a right but not a obligation, to buy or opt i.e., option to buy or opt a fixed number of shares of the company at a stated price during a specified period, often at a discount from the market price at the date of grant. The options under a plan vests over a period to an employee subject to fulfillment of certain employment related conditions e.g. continued employment for a specified period. In the case of performance-based plan, the employees have to meet specified goals in addition before vesting can occur. Often companies will require the employees to hold the allotted options for a period of time before being exercised. Several types of stock options plans are in vogue and a company selects plans based on several considerations including the ability of the plan to motivate employees, its tax implications, and the industry practices. In developed countries these plans are seen as an important HRD(Human Resource Development) tool. But, companies in developing countries, mainly those in the IT sector are including this type of compensation in their remuneration packages for their global linkages. But in India other sectors have also used and issued equity to employees and the scope of my study is to analyze the opinions and benefits derived by the employees of Indian nationalized banks. The term ESOP(employee Stock Ownership Plan) has been used by me to refer to the a basket of instruments and incentive schemes provided to the employees ESOPs, “Employees Stock Ownership Plans” or "Employees Stock Options Plans" is the generic term for a basket of instruments and incentive schemes provided to the employees of the company to motivate, reward, remunerate and to retain the employees. These are rather modern way of motivating employees as against the age old method of compensating the employees with salaries alone. It is now an accepted practice for large entities to remunerate their employees, apart from salary, by the way of granting options to the employees to acquire the shares, hence a portion of the ownership, of the company for which they work. This is believed to motivate employees as they can closely relate their success with the success of the entity for which they work.

There are various instruments like:
1. ESOS (Employee Stock Option Plans).
2. ESPS (Employee Stock Purchase Plans).
3. RSUs (Restricted Stock Units).
4. SAR (Stock Appreciation Rights/ Phantom Shares.
5. Performance Shares.

2.Scope of the Study
1. To understand various schemes of ESOP in different companies, provided by them to the employees. There are various kinds of option provided to the employees; this project aims at understanding various kinds of equity options available in the market which are mostly in use to for offering to employees in the nationalized Banks 2. Understanding the criteria and process for determining the eligibility of employees under the option scheme. Every company has their own criteria and in some cases the appraisal process for determining the eligibility of employees for such options. One of my objective is to understand, in relation to the nationalized banks which I have taken up, the grades of employees in the company who are eligible and if there is any appraisal process to determine the further issue of ESOP. 3. It is belived that ESOPs enhance productivity, motivate employees’ and increase employees’ interest in the company’s overall performance, hence it is worth understanding how much it does impact the employees and what do they feel from employees’ point of view. The benefits derived from employee’s point of view and what is the impact of equity offered to them, the level of satisfaction derived by them and participation in equity from their point of view. Study of preference for ESOP against other...
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