The most pivotal asset a company has is its workforce. Therefore, it is not only vital to hire outstanding talent, but it is also critical to retain them. This presentation is designed for those who want to determine whether an ESOP can be used as a hiring tool. From this presentation, you will understand how ESOPs can be used for hiring the best talents.

1. Topic: Using ESOPs as a Hiring currency
Presented By: Harshu Ghate

2. Setting the Context
Rebounding economic scenario
Flourishing start up eco system
Unprecedented flow of capital
Talent war
Is ESOP being used as a glamorous tool?
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3. Context of this webinar
Is ESOP a currency?
If so, is it the right one?
•How can traditional structures be tweaked to
make them suitable?
•What are the pre requisites to make it work?
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4. Can ESOPs be a currency?
No
No instant realisation
No fixed value
Change in value can be huge –
either way
Not tradeable
Realisation is conditional
Yes
It’s a convertible currency ( near cash)
Liquidity events bring ESOPs closer to cash
Though not tradeable – it’s a monetizable asset
Less speculative than Stock market
Yes
It’s a convertible currency (near cash)

5. Is ESOPs the right hiring currency?
Servicing of ESOPs
• Equity settled Options create new Equity
- which is permanent - needs to be serviced for the life time
• Cash settled Options result in Cash pay out as Opex
Every service delivered should have a matching reward
• Some services delivered have long term value - need to be rewarded over a long term
• Services delivered with short term impact - need to be compensated in the short term (Cash)
Employee Compensation

6. Balancing the reward and expectations
Long term
reward
Short term
expectations
•Companies trade off between Cash and
Non cash incentives
•Pandemic lead to lower Short term
rewards
•Job tenures are reducing
•ESOPs are different than usual Short term or
Yearly performance incentives
Equity and business performance is
judged on 5 – 7 year performance
•Classical ESOPs are aimed at improved
sustained long term performance

7. Finding the balance is difficult
•Is it desirable ?
Should ESOPs be used for short term reward by
creating permanent equity?
Is it more important to work / communicate with
employees on their short term focus?
•Is ESOP the right instrument to meet short term
expectations?
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Long term
reward
Short term
expectations

8. Attempting the balance
• Long term impact Long term reward (ESOPs)
• Short term impact Short term reward (Cash)
• Long term service Short term reward (Cash)
• Short term service Long term reward (ESOPs)
Maintaining this equation is critical for its use as a Currency

9. When and how much to use?
Use of Equity as a Short term reward
- in exceptional situations - should not be used regularly
In exceptional situations
• match the term
• provide certainty
• upper and lower cap on returns
Exceptional situations
• adverse business environment
• cash crunch (cash is costlier
than equity)
With use of caps and quantity
• match the reward with the compensation
foregone
• use equity scarcely
Non-exceptional situations
• equity is costlier than cash
• want to drive sustained long
term growth
Use equity
• to drive performance
• to link reward to
performance
Link entitlement to criticality
• grant in quantities that would create high
value

10. Some thoughts on the current scenario
Pandemic
period
• Pay cuts
• Cash crunch
Post pandemic
period
• War for talent
• Recovery led
demand
Companies used ESOPs to
compensate loss of Pay
ESOPs should be used
• To retain and attract talent
• To achieve sustained growth
Exceptional situation
• Use of Equity was justified
• Not all matched the term with
reward
• Some provided liquidity to
earlier Options
Meeting the situational
demand
• Spread the ESOP coverage wider
(using appropriate Design)
• Retain the long term nature of
reward

11. About Speaker:
Harshu is the Co Founder and Managing Director of
ESOP Direct. Having worked closely with Private and
early-stage companies, he understood their wants
and strategized the carve out of ESOP Ezee from
ESOP Direct offerings. He is actively involved in
productising the service, design of the platform,
stitching up partnerships and alliances of
complimentary service providers. You can reach out
to Harshu at harshu@esopdirect.com
Harshu Ghate
Managing Director
Disclaimer
The materials and information on this presentation have been prepared or assembled by the Firm and are intended for informational purposes only. Any opinions
expressed on or through this presentation are the opinions of the individual speaker and may not reflect the opinions or guidelines of the Firm or the Industry.
ESOP ezee do not accept or assume responsibility for any other purpose or to any other person to whom this note is shown or in whose hands it may come.
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info@esopezee.com
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