Employee stock option plans (Esops) are a thing of the past now and no brand in the e-commerce wants to invest in it. ESOPs were once considered the ultimate wealth making schemes and every startup wanted them. They have lost their charm with respect to start-ups.
Executives want to keep ESOP component low
As per headhunters, executives are negotiating more to keep the ESOP component of the salary at minimal. For instance, a senior executive selected at an etailing company as CFO was offered Rs 5 crore, 60% of it as ESOP.
But the candidate joined the company only after confirmation that the fixed salary component was increased to 60% and the rest 40% spilt in to ESOPs and performance based related variable.
Candidates look to negotiate high ESOP
Best pursuit firms, for example, Heidrick and Struggles, RGF Executive Search, Transearch, The Taplow Group and Antal International reveal that they are experiencing an enhanced number of candidates who are interested in negotiating high Esop components in salary.
What Ghose said about real value of ESOP
Anandorup Ghose, partner and HR at consultancy Aon Hewitt India, said that,
“There has beena lot of scepticism around the real value of an Esop award. There has hardly been any prominent listing in this segment over the past few years, and the real upside potential from an Esop programme in early stage companies comes from an IPO. That is raising doubts in employee minds.
Secondly, there has been a lot of froth in past few years over perceived valuation of companies. Most companies today have gone through downrounds, so the excitement of significant value growth has also gone”.
Snapdeal story plays a vital role
The Snapdeal story makes everyone more ESOP wary. As per a report, a former employee of an ecommerce company put a question in front of management about the real worth of ESOPs.
Snapdeal is being sold to Flipkart at a precarious markdown and capitalists will get the main inclination on payouts from deal.
This liquidation inclination clasue will intensely affect the Stock option pool which was evaluated at $260 million in 2016. Indeed, current representatives have little lucidity on what their Esops will be worth post the sale.
Joseph talks about a case for ESOPs
Joseph Devasia, managing director at Antal International India, talks about a case of a senior official at an ecommerce business who decided to relinquish almost Rs 15 lakh of Esops because of vest in December and rather went head to head online deals at a huge cosumer business player. “He didn’t put stock in Esops. The new company gave him a hike of 30% and he felt it would be a more secure option.”
Vikram Bhardwaj who is CEO at Redileon Partners, said that, “Esops are no longer the ‘assured win lottery ticket’ they used to be”.
Executive should trust Managers for ESOPs
Bhardwaj says that representatives would fully trust managers’ guarantees on Esops. In any case, now there’s significantly more wariness. Headhunters say that it becomes crystal clear to employees that stock options are only the privilege to buy common stock in the organization.
ESOPs are ranked second after preferred stock, they are prioritized lesser than investors’ or debetors’ rights or claims.