Basics of Employees Stock Option Scheme

Employees Stock Option Scheme can be defined as a scheme under which the company grants option to the employees of the company for purchasing the shares of the company at a fixed price. It is the employee discretion whether to exercise his option or not, company cannot force him or her to exercise the option. Let’s look at some of the terms related to ESOP –

1. Vesting Period – It refers to the period for which employee has to be there in a company before exercising his stock option. There is no fix vesting period, each company can have different vesting period.

2. Exercise Period – It refers to the period during which employees can exercise or apply for their stock options provided his or her vesting period is over.

3. Exercise price – It refers to price which is to be paid by employee for buying the option.

4. Market price and discount price – Market price refers to the price of the stock in the stock market if it is a listed company. To make ESOP attractive to its employees companies offer those stock options to employees at discounted price to the market price of the stock.

5. Non transferable – Most of the ESOP are non transferable implying that either employee has to exercise the option or it will expire worthless, but he or she cannot transfer it to other person.

ESOP is an excellent tool for boosting the employee’s efficiency because as company performs well its stock price will move upwards giving direct monetary benefit to the holders of ESOP.

0 comments… add one

Leave a Comment


Related pages


accounting cost conceptsalaries payable journal entrydefine a traditional economydemerits of dictatorshipmarketing skimming pricingproduct bundling strategysubstitutes complementsabsolute advantage in international tradeadvantages and disadvantages of advertisement on televisionadvantages of debit carddifference between cash credit and overdraftdurable goods definition economicsdefine junk bondscharacteristics of an oligopolycentrally planned economy advantages and disadvantagesnse pre marketdefinition traditional economyadvantages of subsidiary booksmarket economy strengths and weaknessesexplain autocratic leadershipveblen goodswholesale lending definitionconcept of diminishing marginal utilitydefine unitary elasticcost concept in accountingwhat is the full form of ipohow to comment on profitability ratiosdisadvantages of organizational chartjob costing advantagesexamples of unitary elastic demanddisadvantages and advantages of mixed economyconglomerate definition economicsdiscounting a billexpenses meaning in hindiauthorized vs issued sharesan example of deferred revenue is unearned rentunearned service revenue still unearned journal entrymeaning of escrow accountdistinguish between explicit cost and implicit costadvantages and disadvantages of globalisation wikipediajob and process costingbond ladder strategyadvantage of socialismfifo method advantagesadvantages of decentralized organizationcpi acronymskimming price strategy definitiondisadvantages of financial accountingborder fence pros and consmarket segmentation disadvantagesacronym fmcgadvantages of merger and acquisitionfluctuates definitionaccounting concept meaningunitary price elasticity of demandrepo full formmixed economic system advantages and disadvantagesindustrialization disadvantagescapital turnover ratio calculationcalculation of crr and slrconglomerate companiesbill discounting meaningfinal goods vs intermediate goodsimportance of mixed economyadvantages and disadvantages of advertisement on televisionwhat are durable and nondurable goodsadvantages and disadvantages of delegationdisadvantages of horizontal integrationfii meaningwhat is meant by fictitious assetscapm model assumptionswhat is a derivative marketbanking advantages and disadvantagesadvantages of process costingdebentures in hindiprofit skimmingprocess costing disadvantagesskimming examplesadvantages of authoritarian