At the core of launching a successful ESOP scheme is getting the mathematics right for all stakeholders viz. shareholders, company as well as the employees. Yet, we see most companies focus more on administrative and secretarial aspects. Whilst these aspects are important, to us at Veritas, they constitute the Stage 2 of the implementation process.

Stage 1 is essentially designing the scheme before its enshrined in the documents and involves, amongst other things, balancing interests of various stakeholders as depicted in the picture below:

Shareholders
  • - Ensuring optimum dilution - not diluting too fast, too soon
  • - Aligning milestones for shareholders and employees
Company
  • - Ensuring charge to Income statement is within expected levels
  • - Ensuring enough flexibility for Board to cater to emerging needs
Employees
  • - Ensuring meaningful wealth creation for employees
  • - Benchmarking expected wealth creation to CTC, industry etc.

Stage 1 is essentially designing the scheme before its enshrined in the documents and involves, amongst other things, balancing interests of various stakeholders as depicted in the chart.

Should you have any comments or thoughts or feedback, please feel free to share write to us. We would love to hear from you!

 

Vichitra Malhotra, FIAI

Founder and Consulting Actuary

v.malhotra@veritas-india.com

+91-9372876627