Employee Incentive Schemes In Austrian SME And Start-Ups

Incentivizing employees to increase their performance is a basic management principle. Already decades ago, theory and practice have started to use incentives that align employees' with shareholders' interests to solve the principal-agency conflict described in corporate finance theory. One way to achieve this is to grant employees a participation in the shareholder value. Such schemes are commonly referred to as Employee Stock Ownership Plans (ESOP). ESOP are now as popular as never. There are various ways to implement such programs. The following paragraphs provide a brief overview on corporate, tax and commercial cornerstones of ESOP relating to small and medium enterprises (SME) and start-up companies in Austria in the most common form of an Austrian limited liability company (GmbH).