An Analytical Study of Leading Indian Companies' Employee Stock Option Schemes

Abstract

An Employee Stock Option Plan (ESOP) is a benefit plan for employees that allows
them to become stockholders in the company. ESOPs have various qualities that set
them apart from other employee benefit programs. Most businesses, both domestic
and international, see this scheme as a crucial tool for rewarding and retaining
personnel. Currently, this type of reorganization is particularly common in IT firms
where manpower is the most valuable asset.
ESOPs are commonly utilized to encourage employees to give their all, allowing the
company to experience lower employee turnover and retain its talent pool. These two
purposes presumably account for more than two-thirds of all ESOPs currently in
existence, and their numbers are projected to grow over time. This is what new
financing approach that is gaining popularity in emerging nations like as India and
witnessing amazing development in the United States. ESOPs provide a market for
the shares of closely held enterprises, encourage higher employee productivity, and
offer tax benefits in the financing of acquisitions, capital improvements, charity
giving, and stock purchases from retiring owners. In India, ESOPs are commonly
used by enterprises in the IT/Software, Banking/Financial Services, Cement, Drugs &
Pharmaceuticals, Synthetic Fibers, FMCG, and, more recently, E-Business sectors.
Most businesses use ESOPs to either retain personnel or to hire an employee from a
competitor. However, ESOPs have significantly greater potential than these solutions.
ESOPs are useful when an employee plays a significant role in a company's ongoing
progressive growth. (Recent examples include ICICI Bank and Infosys.) The primary
goal of providing such a plan to its employees is to provide shares in the company at
a discounted price to the market price at the time of exercise. Many organizations

(particularly those in the start up phase) have begun to offer Employee Stock Options
since it benefits both the employer and the employee.
The article analyses the status of employee stock ownership plans (ESOPs) in top
Indian organizations and the policies they have put in place to use it as a tool to
recruit and retain employees. It also looks into the legal structure that governs ESOPs
as well as the various tax issues that they raise. most recent instances.)