ESOPs are back in fashion after slowdown
Globally, start-ups have used ESOPs to recruit key executives, reward and share the risk with them. Companies like Quattro BPO, Mercer Consulting, Bajaj Electricals etc., for instance, have used it as a tool to attract and retain employees at early stages of their inception. In India it is still in its early stages, whereas, in the west ESOPs are a major part of total compensation of senior executives. As time graduated many organizations like L&T, Murugappa group etc. has used ESOPs to gain shine in the job market. However, as the downturn came this practice was adversely affected and excitement around ESOPs was waned. Now, that the economic recovery has begun, experts believe corporate India will see a mature ESOP. Companies are now willing to experiment with variants of ESOPs to suit their needs better. These range from phantom options to restricted stock units (RSUs), stock appreciation rights (SARs) to performance share plans. Companies like Wipro are looking at alternative means like deep-discounted restricted stock units to make options attractive. L&T offered SARs to avoid equity dilution and yet offer its staff the upsides of the stock movement. Companies like Infosys are going one step ahead, giving ESOPs to independent directors and driving board level involvement.