Asian Journal of Management

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Analysis of Employment Stock Options Scheme


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1 Hidayatullah National Law University, Raipur, India
     

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In today's corporate scenario, "human talent" acts as the key differentiator between successful organizations and others. The recognition of Human Capital as the Prime Resource of business organization, has led to fierce competition for attracting, retaining and motivating talent. The Employee Stock Option Schemes in different forms are the most effective form of management as it synergizes the interests of the employees and corporate entity they work for. It is this synergy which motivates employees to give that indefinable "extra" which brings sustained growth and profitability. In India, we have discovered a few examples of the success of ESOPs, to be specific Wipro, Dabur, Infosys and so on. However, India has still not fully utilised the benefits to be offered by ESOPs mainly due to lapse in policy regulations.

The present study aims to talk about the development of ESOPs, its benefits, the structure followed in other countries, the legal framework in India and the assessment of this framework. The paper presents different ideas and strategies through which ESOPs has been applied by enterprises to enable successful management to discover the current viewpoints in order to make it an achievement in the future.


Keywords

Employment Stock Option Schemes, Legal Framework, Benefits of ESOPs, Application of ESOPs by Enterprises, Types and Structure of ESOPs.
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  • Gupta, Ambuj, A Critique's View of Employee Stock Options in India: Re-Assessment and Perspectives (August 10, 2010). Available at SSRN: http://ssrn.com/abstract=1692057

  • Here in after referred to as "ESOP"

  • Clause 2A, Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

  • As cited by H.Rosenberg, "Are ESOPs headed for trouble?", Institutional Investor, 1987

  • Ibid

  • Ibid

  • Gupta, Ambuj, A Critique's View of Employee Stock Options in India: Re-Assessment and Perspectives (August 10, 2010). Available at SSRN: http://ssrn.com/abstract=1692057

  • T. Venkateswara Rao, Raju Rao, 360 Degree Feedback and Performance Management System, Volume 1, Excel books, New Delhi, 2002

  • Ibid

  • Ibid

  • Stanley B., The Advantages and Disadvantages of ESOP's: A Long-Range Analysis, Journal of Small Business Management, Vol. 29, No. 1

  • Karan Batra, Understanding Employee Stock Option Plans (ESOP's), February 19, 2013. Available at http://yourstory.com/2013/02/understanding-employee-stockoption- plans-esops/

  • Id

  • Ibid

  • http://www.esopindia.com/Faq.aspx

  • Gupta, Ambuj, A Critique's View of Employee Stock Options in India: Re-Assessment and Perspectives (August 10, 2010). Available at SSRN: http://ssrn.com/abstract=1692057

  • Id

  • Robert A. Frisch , ESOP: The Ultimate Instrument in Succession Planning, Wiley Publishing Co. , June 2002, ISBN: 978-0-471- 22085-5

  • Andrew Pendleton, Employee Ownership, Participation and Governance: A study of ESOPs in the UK,2001, Published by Routledge

  • Ibid

  • Explanation-II, Section 79A, Companies Act, 1956

  • Section 79A, Companies Act, 1956

  • Clause 4, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 11, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 5, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 6, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 7, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 8, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 9, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 12, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Clause 14, SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • CIR/CFD/DIL/3/2013, http://www.sebi.gov.in/cms/sebi_data/atta chdocs/1358405632526.pdf

  • Informal guidance CFD/DCR/SKM/TO/18378/2010 dated September 2, 2010 issued to Ram krishna Forgings Limited; Informal Guidance CFD/DIL/IG/SK/VT/180/2010 dated April 5, 2010 issued to Siemens Ltd.

  • Minutes of SEBI Board Meeting, PR No.77/2012:http://www.sebi.gov.in/sebiweb/home/detail/24234/yes/ PR-SEBI-Board-Meeting

  • Vide SEBI Circular CIR/CFD/DIL/3/2013 dated January 17, 2013

  • Ibid

  • Annexure II, SEBI Circular CIR/CFD/DIL/3/2013 dated January 17, 2013

  • SFAS 123 (US GAAP) and IFRS 2

  • Generally Accepted Accounting Principles

  • SEBI (Employees Stock Option Scheme and Employee Stock Purchase scheme) Guidelines, 1999

  • Guidance Note on Accounting for Employee Share-based Payments, issued by the Council of the Institute of Chartered Accountants of India, 2005

  • After Budget, 2009

  • Karan Batra, Understanding Employee Stock Option Plans (ESOP's), February 19, 2013. Available at http://yourstory.com/2013/02/understanding-employee-stockoption-plans-esops/

  • Malini Goyal, ESOPs: Back in Fashion, Forbes India Magazine, 06 November, 2009 edition

  • Ibid

  • Karan Batra, Understanding Employee Stock Option Plans (ESOP's), February 19, 2013. Available at http://yourstory.com/2013/02/understanding-employee-stockoption-plans-esops/

  • Prayag, Anjali, "ESOPs out, tenure-linked bonuses in",The Hindu Business Line, Feb 06,2010

  • Id

  • Prayag, Anjali, "ESOPs out, tenure-linked bonuses in",The Hindu Business Line, Feb 06,2010

  • Flock, Elizabeth, Ramnath, N.S., "Two different ways of making ESOPs work", published in the Forbes India Magazine, November 06, 2009.

  • Malini Goyal, ESOPs: Back in Fashion, Forbes India Magazine, published on 06 November, 2009


Abstract Views: 552

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  • Analysis of Employment Stock Options Scheme

Abstract Views: 552  |  PDF Views: 2

Authors

Surbhi Gupta
Hidayatullah National Law University, Raipur, India

Abstract


In today's corporate scenario, "human talent" acts as the key differentiator between successful organizations and others. The recognition of Human Capital as the Prime Resource of business organization, has led to fierce competition for attracting, retaining and motivating talent. The Employee Stock Option Schemes in different forms are the most effective form of management as it synergizes the interests of the employees and corporate entity they work for. It is this synergy which motivates employees to give that indefinable "extra" which brings sustained growth and profitability. In India, we have discovered a few examples of the success of ESOPs, to be specific Wipro, Dabur, Infosys and so on. However, India has still not fully utilised the benefits to be offered by ESOPs mainly due to lapse in policy regulations.

The present study aims to talk about the development of ESOPs, its benefits, the structure followed in other countries, the legal framework in India and the assessment of this framework. The paper presents different ideas and strategies through which ESOPs has been applied by enterprises to enable successful management to discover the current viewpoints in order to make it an achievement in the future.


Keywords


Employment Stock Option Schemes, Legal Framework, Benefits of ESOPs, Application of ESOPs by Enterprises, Types and Structure of ESOPs.

References