Diagnostic review of existing ESOP Plans to cure deviations

A known unlisted company in NBFC space had implemented an ESOP Plan since last 3 years.

The company observed that the attrition rate was climbing up every year. As the company operations were normal, there was doubt if ESOPs are doing their job. Before reaching an uncontrollable situation, it was desired to have a diagnostic examination of the ESOP Plan.

Our strategy was to check the efficacy of the existing ESOP plan from many directions –

(i) ESOP plan language in critical parameters (for simplicity and unambiguity),

(ii) ESOP structure basis realities of the company (i.e. expectation w.r.t. the business plan and sectoral growth),

(iii) ESOP monetization avenues (if reasonable, certain and unambiguous),

(iv) provision on resignation, and more importantly

(v) employee communication (i.e. if employees know that they are sitting on value).

There were optimisations in the vesting conditions, exercise price, exercise period, innovations in the ESOP monetization after checking impact on the company’s financials. There were thoughtful privileges created for talents working longer. Resignations after a long period of association was given due value (which the earlier plan tried to penalise).

Overall, our focus was not only commercially making the things fit but to gain employees’ faith in it.