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Do stock options make sense for employees during COVID times?

Many employers have introduced stock options to tide over the immediate cash crunch in their businesses and to also be fair to employees

May 26, 2020 / 10:12 AM IST

Homi Mistry

The COVID-19 pandemic has created unprecedented disruption and uncertainty for businesses. One of the key priorities for many companies is to conserve cash and ensure continuity. Many employers have introduced non-cash compensation components such as Employee Stock Option Plans (ESOPs) to tide over the immediate funds crunch and to also be fair to employees who may benefit when businesses return to normalcy in the future.

Non-cash compensation

An ESOP is an option that is granted to an employee for purchasing the company’s shares at a pre-determined price, at a future date, upon completion of certain vesting conditions. These conditions may be performance (of the employer or employee) based or time-based. Upon fulfilling the vesting condition, the ESOPs vest to the employee, i.e., the employee gets an unconditional right to purchase the shares at a pre-determined price.