ESOP (employee stock option plan)

    ESG & Governance

    A scheme that gives employees the right to buy company shares at a set price after a waiting period.

    Listed company ESOPs follow the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations 2021. A scheme needs a special resolution, options must vest over at least one year, and promoters and large shareholding directors are generally not eligible. Under Ind AS 102, the fair value of options is charged as an expense. ESOPs dilute existing shareholders when exercised, so check the options outstanding against total shares.

    Related terms

    Say-on-payKey managerial personnel (KMP)Nomination and remuneration committee (NRC)

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