Towards a Total Rewards Management System
February 12, 2025
First things first! Before we jump on to discuss how critical it is to attract and retain talent and how your employer brand is significantly connected with it, let’s understand the term ‘open talent economy’. Coined by Deloitte, open talent economy is a way to work or conduct business in a borderless and technology-enabled market. […]
All of us have heard the story of 3 brick-layers who were working side by side when a passer-by asked them what they were doing. The first said – “I am laying bricks” The second said – “I am feeding my family” The third said – “I am building a cathedral” This simple story conveys […]
What is Technology Transfer and why is it so Important for Corporates? Technology transfer. This is a term that bedevils companies in various sectors when they place large orders and enter into joint ventures with other firms. To explain, technology transfer refers to the practice of the foreign firm transferring the technological knowhow and the […]
Need for HRM Strategies to Change with the Times Given the volatility and uncertainty that characterize the present day world which is also increasingly becoming more complex, the HRM or the Human Resource Management strategies need to change with the times. For instance, conventional recruitment and training strategies are heavily oriented towards hiring science and […]
What is an Entrepreneurial Ecosystem? All of us are endowed with skills, abilities, and capabilities. However, the reason why some of us are so successful whereas others languish is mainly due to the way in which these traits are nurtured, encouraged, and enabled. For instance, we need to go to the right schools, have supportive […]
Employee Stock Option Plans (ESOP’s) are one of the most popular ways in which modern startup companies reward their early employees. In Silicon Valley, many companies such as Google and Facebook have used Employee Stock Option Plans (ESOP’s) to lure the best talent from the market. Since these companies have become very successful, there are several multi-millionaires in the Silicon Valley area thanks to these Employee Stock Option Plans (ESOP’s).
However, this does not mean that Employee Stock Option Plans (ESOP’s) always work. In some cases, the objectives of both the employer as well as the employee are met. On the other hand, in many cases, Employee Stock Option Plans (ESOP’s) create a lot of problems. In this article, we will have a closer look at the downside of these ESOP’s. We will have a look at the downside from the point of view of the company as well as the employees.
Employee Stock Option Plans (ESOP’s) are always marketed as being financial instruments which bring democracy into companies. Many companies have reported high growth led by motivated employees and democratic decision-making process after Employee Stock Option Plans (ESOP’s) were introduced. Also, ESOP’s allow better financial management. The employees can defer smaller present payoffs for bigger payoffs in the future. Also, there are considerable tax advantages to using Employee Stock Option Plans (ESOP’s). However, there are many disadvantages as well. Some of them have been listed below.
The anecdotal stories of Employee Stock Option Plans (ESOP’s) multi-millionaires are more the exception than the norm. Employees also face several disadvantages when they accept a large chunk of their compensation in the form of Employee Stock Option Plans (ESOP’s). Some of them have been listed below.
To sum it up, Employee Stock Option Plans (ESOP’s) are not as beneficial as they are claimed to be. They too have a lot of drawbacks which both parties need to consider before they decide to use the Employee Stock Option Plans (ESOP’s) as a method of compensating workers.
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