Strategies to make the most of stock option plan
The success of any plan depends on its ability to convince its targeted participants. They should be able to perceive it as a chance to incentivise themselves for their performance, and not as a ‘noose’ to tie them to the company.
The employees should be made to understand that the plan gives them the flexibility of participation as well as an opportunity to grow with the company. The employees should be made aware of the eligibility criteria to participate in the plan, its operation, benefits and associated tax implications. Most importantly, an employee must know how and when an employee can exit from the plan and encash the promised wealth.
In case the company’s shares are not traded, determination of the fair market value of the shares could create uncertainties for the employees. The company could build the confidence of the employees by upfront providing the valuation methodology rather than leaving it to discretion of the promoters.
When it comes to stock option plans, employees struggle to understand the ‘technicalities’ and the ‘legalese’ of the plan. Hence, the company should ensure appropriate and clear communication by conducting group sessions for employees, by introduction of an FAQ manual and an executive summary of the
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