Introduction
Louis Ortho Kelso, a political economist and lawyer, back in
1956, created the first employee stock ownership scheme based on
his belief that the ownership of a company should ultimately vest
with its employees as they are the ones responsible for the
company's success.
Procter & Gamble and Sears Roebuck were among the first to
introduce Employee Stock Option Schemes ('ESOS'). In India,
the concept of Employee Stock Options ('ESOPs') was
introduced in the Companies Act 1956, vide the Companies
(Amendment) Act, 2000.
Today, ESOPs are commonplace. From a company perspective
(especially Start-ups), ESOPs are a tool to incentivize and retain
employees by providing them with an opportunity to purchase company
shares at a pre-determined price at a certain point in the future
based on factors such as performance and/or lapse of a specific
time period. From an employee perspective, while a sense of
ownership is valuable, the immediate availability of
