The slowdown has brought a maturity to the employee stock options plan. Gradually, the number of companies opting for ESOPs is growing, but there is no one formula that fits all
When BPO pioneer Raman Roy was setting up Spectramind in 2000-2001, its human resources head S. Varadarajan offered share ownership to 500 staff members. “We wanted to share wealth with people who helped create the company,” Varadarajan says. When Wipro bought out Spectramind, everyone made the equivalent of at least a year’s salary on their ESOP plans. Even better, turnover among the top managers was zero. Now, at Quattro BPO Solutions, another start-up from Roy, Varadarajan heads human resources and is replicating the ESOP experiment, covering employees from the supervisor level.
Pushing Performance
In a difficult business environment where pushing employee productivity is the key to survival, companies are pegging their stock option plans to corporate and individual performance. To calculate eligibility, they are moving away from the volatile measures of the stock market and going for more predictable pointers such as business orders, profit margin, relative performance in an industry and customer satisfaction. Some sanity is returning to compensation planning too. Purohit of Hewitt Associates sees a dip in heavily used deep discounted ESOPs. Cash-starved firms are looking at supplementing salaries with options.
(This story appears in the 06 November, 2009 issue of Forbes India. To visit our Archives, click here.)