Topics: Security, Stock, Stock market Pages: 6 (1767 words) Published: September 6, 2013

Employee Stock Option Plans (ESOPs) & Employee Stock Purchase Schemes (ESPSs) are employee benefit plans, which makes the employee of the company owners of stock in that company. Stock options are the instruments that are offered to employees, allowing them to buy a certain number of shares in the company at a specific price. This price could either be lower than the current market-price of scrip-in which case their gains are immediate-or the same, whereupon future jumps in the share-price will show up as profits for them. There has to be a gap between the announcement of the ESOP and its coming into effect. You also have the freedom to specify how many shares an employee gets, which employees get them, and when the ownership is actually transferred. ESOPs & ESPSs are unique employee benefit plans and are fast replacing cash incentives as a method to reward and retain employees. The spirit of ESOP is that it would give the employees a share in the wealth of the company and infuse a sense of ownership & thence loyalty. This helps retaining talented and skilled employees, especially in today’s scenario when the employee turnover and churn is high. It also improve the productivity and performance of the Employees.

The scheme extends to eligible employees in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines. The board of directors of the Company would decide the entitlement of Employees based on his/her level, grade and seniority

• An incentive to the Employees for achieving the Company’s medium/long term goals. • An incentive to the Employees to maintain a long association with the Company. • Motivation of Employees.

• Employees’ participation in shareholding of the Company. • Bring long-term value to the shareholders. Motivate Employees to drive Company’s performance.

As per SEBI Guidelines:
i. "Employee Stock Purchase Plan or Employee Stock Option Scheme" whereby the employee allows the employer to withhold a certain portion of his monthly salary, the accumulated amount of which is utilized to acquire shares at a discounted value or otherwise at a future date. ii. "Employee Stock Ownership Plan" whereby an employee of the company is given option to acquire shares of the company at a pre-determined price after a certain period, directly or indirectly through a trust. iii. "Employee Stock Purchase Scheme" under which the company offers shares to an employee, as part of a public issue or otherwise at a predetermined price. iv. "Employees Stock Option Scheme" under which a company grants option to its employees to buy a specified number of shares at a specified price during a specified period.

A stock option is a right but not an obligation that is given by the Company to its employees to buy shares of the Company. The right of the employees is by way of an entitlement to exercise his/her option and buy shares in the Company. The said price at which the employee buys the option could be and is usually lower than the prevailing price of the share in the market.

SEBI GUIDELINES                        Any company whose securities are listed on any stock exchange may offer equity to its employees under the Employee Stock Option Scheme subject to the conditions specified below: 1. Promoters and the part- time directors will not be entitled to receive the securities under the ESOPs even if the promoter(s) is/are employee(s) of the company. Provided a director who is an employee and not a promoter may be entitled to receive the securities under the scheme. 2. The issue of shares/convertible instruments under an ESOP shall not exceed 5% of the paid-up capital of the company in any one year. 3. Shareholders' permission must be taken after providing them with complete details 4. A company introducing ESOPs shall...
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