Q1. We are an unlisted company. Why should we implement an ESOP Scheme?
A1. You are an unlisted company! That is why you should implement an ESOP scheme.
Q2. If you are done making flashy statements, can you please elaborate?
A2. An unlisted company is generally placed in a strategically advantageous position when it comes to stock options and their pricing. Also, if you are unlisted and on a high growth trajectory, the possibility, certainty and the size of value creation might generally be much higher compared to a company where the growth has stabilized. Employee stock options work magically well in a high growth phase.
Q3. We are a listed company. Are we bound by any specific legal regulations for ESOPs?
A3. Yes. SEBI has specific regulations for share based employee benefits.
Q4. Can we grant stock options at any price we want?
A4. Yes, provided it is not less than the face value. This is, however, subject to certain accounting implications.
Q5. So are you saying that we would NOT be bound by the Sebi Preferential Allotment regulations in terms of pricing the stock options?
Q6. Can promoters be granted employee stock options in a listed company?
A6. Are you kidding me? You are lucky Sebi didn’t hear that. No, a listed company is prohibited from granting employee stock options to promoters as per Sebi regulations.
Q7. Is there a minimum or a maximum limit of equity capital that can be granted as employee stock options?
Q8. Can I grant to a selective group of people in my company or is that legally prohibited?
A8. Law does not govern whom you grant, how much you grant, etc. It is a strategy decision. You can grant options to only one person in the company, or to everyone, or to any random number in between, or to only those who wear bright yellow everyday.
Q9. We are an unlisted company. How do we determine the market price of our equity share to decide the price at which we want to grant the stock options?
A9. You would need to get an equity share valuation exercise done by an independent valuer. The Fair Market Value as per that valuation report can be considered for the purpose of granting stock options.
Q10. We have a huge employee base. And you say that personal human communication of the scheme is very important. It would be a huge administrative burden for us to do that. Isn’t there an easy way out?
A10. When you embark on something of significance, there are no shortcuts. You are not just implementing an ESOP Scheme. What you are trying to achieve is creation of an environment where your people feel like they are a part of a family, with a common vision – an environment where that vision is as much theirs as it is yours. When you connect with your people the way you connect with your family, you get results that are unimaginable. But you need to invest time and an honest effort to get those results. Imagine an organization where every person feels so connected with the vision that (s)he goes to bed thinking what more can (s)he do tomorrow to get closer to that vision. Yes, difficult, but not impossible. Do you still want an easy way out?
Q11. We feel that employees don’t contribute in building an organization at all. They are slaves and should be thankful for whatever little salary we pay them. We feel that all value creation that happens should only be enjoyed by the owners and in no manner should it be shared – whether in the form of equity shares or otherwise – with the team that brings about that value creation. What do you think?
A11. This should help: www.themainplace.org
Q12. We would like to implement an ESOP scheme to charge up our people to create value over the next few years, so that they can also share the value so created. We would also want to ensure that the scheme absolutely fits our organization and our people. What do we do?
A12. Call us on +91 9850 890 378. It would be our pleasure and privilege to walk a few steps with you during this journey. And we assure you. We will make a difference.