Introduction
Employee Stock Options or ESOPs have, over the years, become a
key component of benefits given by India Inc., especially amongst
the start-ups. Simply put, they are the options given by a company
to its employees to own a certain number of shares in the company
at a pre-determined price, but at a later date. The attractive
feature is that with ESOPs one gets an option to own company's
shares at a discounted price. Say, price of ABC's shares is INR
10 today. It grants an option to X to purchase its share at INR 10
after 1 year. When the price of ABC's shares increase up to INR
100, X will have the right to exercise the option and purchase
shares worth INR 100 at INR 10! While this became a lucrative
package for X, ABC, which did not have enough funds to pay X's
salary, gets successful in luring him to stay back till he becomes
eligible to exercise the option.
