A webinar on the “Analysis of ESOPs in Listed Company”, was delivered mainly focusing on implementation and challenges faced by the listed companies at the time of giving ESOP’s. The purpose of this webinar was to analyze the different sets of factors for implementing Employee Stock Ownership Plan, in the listed companies.
Industry experts from listed companies having different industries background were invited for a round table discussion to talk about their market practices, challenges faced by them at the time of implementation of ESOP, which provided very helpful insights on different industry practices adopted by these companies, their objective to implement ESOP, coverage of employees, and how successful is ESOP today in their organizations.
Analysis on ESOP Market Trends practices:
By analyzing how ESOP are actually implemented in listed companies, it was seen that:
- ESOP is recognized as the best tool to recognize, retain, and reward employees and is considered as the best way to recognize, retain, and reward employees. Most of the listed companies have implemented ESOP for the purposes of retain and motivation of employees.
- According to internal research on the number of listed companies that have implemented ESOPs in their companies and study of NIFTY 50 Index Companies, it turned out that it was nearly the same ratio, wherein companies have adopted ESOP policies in their companies.
- Industry wise analysis was done, wherein which sector has mostly implemented ESOP and it turned out to be the BFSI sector i.e., the Financial Services covers almost 36 % of the companies in the index having ESOP, however other sectors are also growing.
- There have been discussions on various best practices for choosing the route of a scheme, and an increasing trend has been observed where companies are now adopting the Trust Route after considering the positive and negative aspects of having a Trust route.
- ESOPs in the listed companies can be seen in the increasing trend considering various factors such as increase in price in the market, various economic growth factors, the liquidity available in the market, peer groups are also offering ESOP’s which creates the industry pressure, and it is a good mode for providing rewards loyalty performance to the employees.
Legal Framework of ESOP’s:
The various regulatory aspects involved in the context of listed companies, do and don’ts
which the companies have to follow and keep in mind when they issue Employee Stock Options, as required by the SEBI (SBEB & SE) Regulations, 2021.
- Types of Equity Instruments to be implemented – ESOP, ESPS, RSU, SAR etc., Employees covered under law, Pool of the scheme etc.… such other terms of the ESOP were discussed.
- Route of the Scheme-Direct and Trust Route, Regulatory procedure involved in case of listed Companies, Pricing criteria for deciding the Exercise Price, Requisite for Trust Route, Limits for secondary acquisition made by trust.
- Various regulatory requirements by the SEBI, stock exchanges, disclosure requirements, accounting aspects etc., were highlighted and discussed.
- Accounting and Tax Implications on employee and how ESOP is a Cost-effective tool was explained.
Round table discussion with Industry experts:
The round table discussion was begun with the various questions received from the public on our platform and were directly asked from the panelist for sharing their brief view on the same. In between the live polling survey was also conducted.
Few key takeaways of the round table discussion were:
- The listed Companies successfully achieved the objective of implementation of ESOP plans in their Companies.
- ESOP’s were generally given to top level management including the senior management employees, employees who are critical and who have contributed substantially to the growth of the company and also based on the loyalty or the continuation of employment in the organization. Further, the various practices adopted by the listed Companies were highlighted while considering the Types and level of management.
- The Companies emphasized the various aspects of granting of ESOP to foreign employees and highlighted the practical challenges faced by them while issuing and getting approval from the RBI.
- ESOP is a cost to the company, and it forms a part of compensation. As the companies’ issues ESOP at today’ value at pre-determined price or at a discounted value, the company is booking a cost in their books. So, here the ESOP becomes a cost-effective tool for the companies.
- The listed companies highlighted the practical challenges they have faced during the implementation of ESOPs and shared the respective solutions they found to resolve these problems.
This webinar was conducted with an object to assess the various regulatory aspects which the listed companies have to keep in mind while the Implementation of ESOP and along with the legal aspects, various market trend practices were also analyzed which gave an insight on various challenges the companies face and what market trend is followed.