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Employee Stock Option Plan

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Employee Stock Options/Short Essay

How do you understand this statement: "By granting employee stock options?"

Can we say that employee stock options act like an investment? That is why, as any investment, it incurs a risk. Right?

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Employee Stock Options/Short Essay Employee Stock Options/Short Essay

How do you understand this statement: "By granting employee stock options?" Can we say that employee stock options act like an investment? That is why, as any investment, it incurs a risk. Right?

Employee Stock Option Plan, is a mechanism by which employees of a particular company are entitled to buy, at a 'fair' value, the stock of the company they work for. Thus it is an option to buy the company's share at a certain price. This price which could be the market price or some other price. Normally, to make an ESOP attractive, the option price is lower than the market price.

The option to acquire shares is generally exercisable over a period of time, known as vesting period (generally ranging from 1 to 5 years). Since options lapse if the employee leaves employment before the vesting period is over, ESOPs work as an incentive for the employee to stick around ...

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