Employee Stock Ownership Plan Organizational Behavior Presented By- Sayantan Roychoudhury
Employee Stock Ownership Plan
Organizational Behavior
Presented By-Sayantan Roychoudhury
Definition• ESOP- Employee stock ownership plan
is a type of employee benefit plan which
is intended to encourage employee to
acquire stocks or ownership in the
company.
• The concept was introduced by Lawyer and investment banker Louis Kelso of USA in 1950s’
In World
• ESOP was introduced in India in 1994 by
Infosys .• Comes under AS15 of ICAI which is Retirement benefits in employee’s
financial statement
In India
BACKGROUND
Improve shareholder
value
Motivate the employee
Retirement plan
Wealth creation for employee
Enhance retention
Sense of belonging and
ownership
OBJECTIVES
To create an additional employee benefit
Incentive based retirement
Company reduces its tax liability
NEEDS
• It operates through a trust which is setup by company.• It provides to the employees in long term .
• Employees with minimum 3 years of service is eligible for ESOP.• The option continues till the age of 60,when employee get an option to diversify
his accounts.• It is profitable to those employee who stay back in the company.
Companies using ESOP in India
ADVANTAGES
2000 Employees of Infosys have shares worth of Millions, 2004
In 2005 Every employee was
covered and ESOP was linked to loyalty and
performance
ESOP makes the attrition
rate of employees to 4%-5% in comparison with 18% of IT industries
DISADVANTAGES
Preference-The younger staff
preferred the bonus in cash or incentive in comparism with
ESOP
Lower Payout-Share price received by employees may not be as good as
they would get if the stock were publically
traded.
High Expense-ESOP plans high
creation and administration cost
CONCLUSION
The wealth creation potential of ESOP has been fully explored in India
ESOP are not still considered in many organizations in India
ESOP is advantage for both company and employee