ESOPs: Boon or bane

It has always been believed that motivated employees are critical for the success of a company. Employee stock option plans or ESOPs have been long considered globally as an important tool to align the interests of shareholders and employees, thereby motivating employees to work hard for value addition to the company.

Simply put, a stock option is, as the name suggests, an option but not an obligation to an employee to buy shares of his or her company at a predetermined price (exercise price). Thus, if the share price exceeds the exercise price, the employee gains, but if it falls