Most employers offer standard perks to employees in their organization. However, this option, one of the lesser offered perks, is given when an employer chooses to reward select employees from the workforce with shares of the company. It is called the Employee Stock Ownership Plan (ESOP).
What is an ESOP?
ESOP plans are retirement plans offered to a select few in an organization. This ownership plan is designed solely to aid the transfer of shares of the company’s ownership. These plans are usually managed by Share Based Compensation Management solutions or tools.
Main challenges of Share Based Compensation Management
Communicating stock options to employees is always tricky. It is difficult to identify ways by which stock option portfolios can be made visible.
Document maintenance & management
It is important to prepare legal documents and keep them up-to-date.
It is critical to not only maintain every piece of information, but to also keep them confidential.
Keeping the stock holders informed about compensation plans.
This documentation demands a lot of time. Making haste in preparing this might result in errors and mistakes.
Main departments responsible for Share Based Compensation Management
- HR Department
Responsible for generating contracts in new grants, controlling the vesting, expiry dates, and existing options, communicating the vesting and exercisable option amounts to employees, etc.
- Finance Department
Responsible for pricing the stock options’ fair value, calculating stocks’ volatility, re-evaluating the stock options contract throughout the vesting period, etc.
- IR Department
Responsible to prepare and/or consolidating quarterly information for regulatory purposes, which is also made available to stock holders, etc.