At 70, when Ashok Soota decided to start over again as an entrepreneur, having worked in fabled wealth creation companies like Wipro Limited and Mindtree Limited, he had some ideas. Specifically around granting stock options to employees. With Happiest Minds Technologies (started in 2011), an IT consulting and services company, he envisioned a venture where employees were committed to building it up right until the Initial Public Offering (IPO). At Mindtree, where he led the consulting firm along with nine other co-founders for 12 years, Soota learned that commitment from employees calls for water-tight incentives and clear terms of reward.
ESOP’s Fables: Getting the story right
The concluding article of the quarterly theme on ESOP structures in Indian private companies captures the good-to-have, must-have and strictly forbidden map of the instrument
Employee Stock Option Plan is a key tool to hire and retain top talent in private companies
Startup founders often do not pay attention to chalking up a clear ESOP structure until institutional investors come onboard
Taxation and company governance make ESOP complex to execute. Its structure has to be water-tight to protect the interest of the company and employees
Stringent rules governing ESOP allocation are usually circumvented by startups by issuing other instruments of reward and/or registering in countries outside of India