Employee Stock Options: Clarifications Issued By The IRDAI

The issuance of Employee Stock Options (ESOPs) to Chief Executive Officer/Whole-time Director/Managing Director of Insurers has been expressly recognized since 2016 when the IRDAI issued the Guidelines on Remuneration of Non-executive Directors and Managing Director /Chief Executive Officer/Whole-time Directors of Insurers of 05 August 2016 (Guidelines). The Guidelines stipulate that ESOPs are to be kept outside the computation of the total remuneration but the extent of ESOPs granted by the Insurer should be reasonable.

The IRDAI while approving the remuneration of Whole-time Directors, Chief Executive Directors and Managing Directors, also considers the granting and/or vesting of ESOPs. In certain cases, the exercise of ESOPs by one or more key management persons (KMPs) whether singly or jointly would result in issuance of equity shares beyond the permissible threshold limits specified under §6A of Insurance Act 1938 (Insurance Act). §6A(4)(b) of Insurance Act