India is probably the hottest labour market of the world and attracting and retaining the right talent is the key issue before many of the CEOs of Indian companies. For this, companies adopt many schemes and employee friendly policies. Employees stock option plans (ESOP), which lost their charm briefly after the tech bubble burst in 2000, are back in favour with both employers and employees. | |
| What the employees want nowadays is not just the compensation package offered to them at the end of the day, but a clear roadmap for their future growth, including long-term benefits from the company. This is the reason why most companies go for employees' benefit programmes like ESOP. |
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| "The employers should also understand that employee benefits is 'earned today and paid in the future'," said Babloo Ramamurthy, European head of global consultancy firm Watson Wyatt. He was addressing a seminar on "Management of ESOP and other employee benefit plans: Design, disclosure and accounting issues", jointly organised by ASSOCHAM and Watson Wyatt Worldwide here on Tuesday. |
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| He said past examples showed that companies that had introduced ESOP performed better. "Particularly, this is very very helpful for start-up companies who face a high attrition rate and retaining talents is a huge challenge for them," he said. But can ESOP and making employees partners in companies alone address the problems? |
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| Answers V Chandrasekaran, CEO and MD of Bangalore-based Aztec Software, "Employees stock option alone is unlikely to have an impact on the performance of companies, especially for the IT sector where the compensation package is at least 25-35 per cent higher than other sectors." What companies need is to create a participative culture while at the same time giving preference to ESOP. A participative culture without ESOP will not work. |
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| Chandrasekaran said it was the duty of companies to create an ownership culture, while ensuring that the employees interpreted the term 'ownership' in the right way, beyond the purely legal sense. For this, stock owners need a high degree of knowledge about the company and its operations. |
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| Vijaya Sampath, chairman, ASSOCHAM expert committee on company law and corporate director said employee benefit plans allowed the employee to be the owner of the company's stock or share. |
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| However, unless formulated clrearly, this could be a golden handcuff, both for the employees as well as the employer, she added. |
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