myz-vgb.ru A Business Encyclopedia

SEBI Guidelines on Employee Stock Option Scheme

Definition: The Employee stock option scheme or ESOs is the form of executive compensation, wherein the selected executives are given a certain number of shares of the firm. Here, the employees have the right, but not the obligation to buy or sell the company’s shares at a specific date and at a specific time.

The companies listed on the securities exchange must comply with the SEBI guidelines on employee stock option scheme. These guidelines are:

  1. Eligibility: An employee can participate in the ESO scheme if he satisfies the following:
    • He is not a promoter or,
    • He is not a director who directly holds 10 percent of the outstanding equity shares.
  2. Compensation Committee: No employee stock option scheme could be initiated until and unless the compensation committee has been formed. This committee comprises of the board of directors wherein the majority should consist of independent directors, who supervises and gives advice on the ESO scheme.
  3. Shareholder Approval: It is mandatory to get the approval of the shareholders of the company before offering the ESOs to the employees. The approval can be acquired through a passing of a special resolution.      
  4. Pricing: The company making an offer of ESOs to its employees has the right to determine the stock’s exercise price provided, it conforms to the accounting policies as specified in the SEBI guidelines.
  5. Lock-in-Period and Rights of option holder: There must be a time gap of one year between the granting of the options and the vesting period (time for which the employee has to wait to exercise his option). Until the shares are issued upon exercise of the option, the employee shall have no rights as that of the shareholders.
  6. Accounting Treatment: The option’s accounting value can be determined either through the Black-Scholes model or as the difference between the exercise price and the market price (the price at which the options are granted).

What is Black-Scholes Model?

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


law of inertia of large numberslist of inelastic productssubstitution methodcharacteristic of oligopolistic marketdefine cottage systemwhat is micro environmental factorswhat is press agentry in public relationsexternal commercial borrowings indiaautocracy definitionneed for achievement theory by david mcclellandparticipative decision making modelemployee empowerment definitionthe meaning of autocracyvroom's expectancy theoryturnaround management definitionmeaning of 6 sigmaasset turnover ratio examplethe institute of company secretaries of india icsimm hypothesis capital structure theoryscalar chain principleliquidations definitionbalanced scorecard in hrmretained earning meaningconglomerate merger definitionmonopolies defineordinal approach in economicsstate and explain the law of diminishing marginal returnsethnocentric business definitiondetermination meaning in teluguformula for cash ratiofixed cost economics definitionblanchard definitionrbi timings for neftcentric staffingdefinition of scatter charttwo bin kanban systemdivest strategymeaning of distribution channelfrictional unemployment refers topert definitionwhat does crr meanbusiness cycle and its phasestrait theory of personality definitiondefine elastic in economicsquants meaningnational savings certificates nscmeaning of higher purchasegrading method of performance appraisaldefinition of deontological theorywhat is sbu in strategic managementethical systems definitionvarious pricing methodslikert scale questions definitionwhat is an oligopoly in economicswhat is meant by the term utilityethnocentric orientation company examplewhat is neft in bankingdefine staggereddefine truncatedefine snowball samplingentrepreneurial ventures definitionneft systemnormal profit monopolydefinition divestmentdefinition divestedautocratic management styleslaw of diminshing marginal utilitydeontology ethics definitionreturn on capital employed ratio formulaperfect competition in economics definitiondefinition of autocraticsegmented market definitionfree rein leadership definitiondef discriminationcapm modesinking fund depreciation