Section: HR & People · CompensationDifficulty: Advanced
Employee Stock Ownership Plan
USUK
A plan granting employees the right to buy company shares at a fixed price.
Also: ESOP · stock options · ESOPs
Definition
An Employee Stock Ownership Plan (ESOP) is a compensation scheme that gives employees the right to purchase company shares at a predetermined price (exercise price) after a vesting period. ESOPs are commonly used by startups and tech companies to attract talent, align employee interests with company performance, and conserve cash. When the company's market value exceeds the exercise price, employees can profit significantly.
Example
“The startup offered 1,000 ESOPs at an exercise price of ₹100 per share with a four-year vesting period; after the IPO, shares were worth ₹800, giving employees substantial gains.”
Synonyms
- stock options
- equity plan
- employee equity program
- share ownership plan
Images
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