An employee stock option (ESO) is commonly viewed as a complex call option on the common stock of a company, granted by the company to an employee as part of the employee's remuneration package
2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
3. Employee Stock Option
• An employee stock
option (ESO) is
commonly viewed as a
complex call option on
the common stock of a
company, granted by the
company to an employee
as part of the employee's
remuneration package
4. Employee Stock Option
• Many companies use
employee stock options
plans to retain and attract
employees, the objective
being to give employees an
incentive to behave in ways
that will boost the
company's stock price.
5. Employee Stock Option
• If the company's stock
market price rises above the
call price, the employee
could exercise the option,
pay the exercise price and
would be issued with
ordinary shares in the
company,
6. Employee Stock Option
• The employee would
experience a direct financial
benefit of the difference
between the market and the
exercise prices.
7. Employee Stock Option
• If the market price falls
below the stock exercise
price at the time near
expiration, the employee is
not obligated to exercise the
option, in which case the
option will lapse.
8. Employee Stock Option
• Another substantial reason
that companies issue
employee stock options as
compensation is to preserve
and generate cash flow.
9. Employee Stock Option
• The cash flow comes when
the company issues new
shares and receives the
exercise price and receives a
tax deduction equal to the
"intrinsic value" of the ESOs
when exercised.
10. Employee Stock Option
• Employee stock options are
mostly offered to
management as part of their
executive compensation
package. They may also be
offered to non-executive
level staff, especially by
businesses that are not yet
profitable, insofar as they
may have few other means
of compensation
11. Employee Stock Option
• Employee stock options are
mostly offered to
management as part of their
executive compensation
package. They may also be
offered to non-executive
level staff, especially by
businesses that are not yet
profitable, insofar as they
may have few other means
of compensation
