Explore BrainMass

Stock Options, description and reasons for

Explain the nature and role of ESOPs (Employee stock options) in strategic management.

Solution Preview

The role and nature of ESOPs (Employee stock options) serve three different functions within a publicly or potentially soon to be publicly traded company. First let us describe the roles or functions of an ESOP. The first role it serves is to encourage workers and management to do a good job and work hard. The idea behind this is more productivity can lead to more profits and with this higher stick valuations. So, if employees are tuned in to this idea, this could happen (because they'd be thinking about their future possible cash rewards when they cash in some of their options. The ESOP also helps to attract better, more educated and loyal employees as well. This is because of the previously described reasons just ...

Solution Summary

An expert describes in explicit detail the design of and reasons for ESOP plans.