Professional Documents
Culture Documents
Esop Corporate Presentation
Esop Corporate Presentation
THE PROVOCATION
¬ Link personal wealth creation to organizational wealth creation
¬ Reduction in cash costs - market pays not the company – can be especially
important for start-up companies that are cash starved
¬ Industry practice
¬ When ??
¬ Growth story is reasonably certain
¬ Exit / liquidity event reasonably certain / exists
¬ Corporate actions
¬ Internal marketplace
The C3 model
¬
3
Conceptualization
Consummation
¬ Communication
Conceptualization
D E C I S I O N P O I N T S
¬ Objective and Coverage
» A thank-you for past loyalty and performance
» Incentive to drive future value
» Promote employee ownership culture CORPORATE STRATEGY
¬ Quantum
» Attractive enough to create “wealth”
ESOP
¬ Coverage STRATEGY
¬ Pricing
» Fair market value – more dilution, no accounting charge
» Discount – less dilution, benefit buffer with accounting charge
» Is a discount called for ?
Conceptualization
D E C I S I O N P O I N T S
¬ Dilution
» Broad based vs selective
» Equity or cash (phantom)
¬ Vesting
» Time based or performance based
» Standard across the board or different for key people
» Uniform, front-ended, back-ended
¬ Policy
» Yearly / half-yearly / quarterly grants
» New joinees – eligibility and effective date of grant
» Promotions / group company transfers / termination / retirement
¬ Legal Structure
» A holding co abroad with a sub in India
» Whether in the holding co or the sub ?
Consummation
C O N S U M M A T I O N
¬ ESOP Agreement
¬ Secretarial Manual
Communication
C O M M U N I C A T I O N
¬ Initial
¬ Grant letters
¬ Notice of Option Grant
¬ ESOP Manual and FAQs
¬ Disclosure document as per SEBI Guidelines
¬ On-going
¬ Financial performance
¬ Stock performance
¬ Future growth trajectory
¬ ESOP as a long-term instrument
Design Approach
M E T H O D O L O G Y
¬ Phase I (Day 1)
¬ Initial discussion with the management to understand the
¬ business model and growth strategy
¬ objectives of the ESOP Scheme – attraction, retention, reward for
loyalty, reward for performance, etc – with the relative importance
¬ current compensation strategy and probable future policy
¬ Phase II (Week 4)
¬ Collection of employee and financial information in specified
formats
¬ Analysis of information and preparation of a broad – level
framework
¬ Discussion of the broad – level framework with the management
and identify changes to be made
Design Approach
M E T H O D O L O G Y
¬ Phase III (Week 8)
¬ Incorporation of proposed changes
¬ Submission of the final framework – specific number of options per
employee, exercise price, vesting schedule and proportion,
vesting conditions, exercise period, separation rules, etc.
¬ Sign off on the final framework
¬ Communication pack
¬ Grant letter
¬ Notice of grant
¬ ESOP FAQs
¬ Employee communication session
Valuation & Accounting
I N D I A N G A A P, U S G A A P & I F R S 2
¬ Statutory Disclosures
Valuation & Accounting
V A L U A T I O N OF E M P L O Y E E S T O C K O P T I O N S
ANNUAL DISCLOSURES
Frequency - Annually
Plan Management
PLAN MANAGEMENT
¬ Data Management
» Online report to employees
» Grants
» Vesting
» Online Exercise
» Separation
¬ Employee Satisfaction
» 24x7 access to individual ESOP data, vesting forecast & option
valuation
» Online Reports
» E-mail alerts prior to vesting, lapse of options, share price reaching a
target level
» Intimation on issue of shares
» E-mail help desk
Plan Management
PLAN MANAGEMENT
Our Managed Service Offering Application
¬ Proprietary web application
¬ conceptualized, developed and maintained in-house
Experience
¬ More than 200 mandates, domestic and overseas, for listed and unlisted
companies
Policy making
¬ Representation on the SEBI Committee for ESOPs
Lineage
¬ Parent company – Kirtane & Pandit, Chartered Accountants – over six
decades old
L E A D E R S H I P
Present responsibilities
Harshu Ghate is the co-founder and Managing Director of ESOP Direct. Apart from handling the overall management of
the Company, Harshu devotes time on critical assignments on ESOP consulting, US GAAP and statutory compliance
issues. Harshu heads the Research,Knowledge development and Branding efforts of the Company. He has conceived and
developed the ESOP administration methodologies and software solutions for the first time in India. He also devotes
time in conceptualizing new software solutions in the field of ESOP administration
Experience
Harshu has more than 18 years of post qualification experience in the area of Corporate Finance, Accounting and
Financial management. He started his career in 1985 as a Partner with Kirtane & Pandit Chartered Accountants, a well
known accounting firm. In 1991 he co founded the Investment Banking arm of the firm and headed it for 7 years. In
1999 he co founded ESOP Direct and continues to head it.
Harshu is very active in the policy making initiatives on ESOPs in India. He is a member of SEBI’s committee on ESOPs
and is co authoring the Accounting Standard for Expensing ESOPs for the Institute of Chartered Accountants of India. He
speaks regularly in national and International conferences on ESOPs and is the India chapter leader of Global Equity
Organization ( a US based organization with over 1000 members all over the world).
Education
Harshu is a Fellow member of the Institute of Chartered Accountants of India (FCA) since 1985 and a licentiate member
of the Institute of Company Secretaries of India since 1987. He is a Commerce graduate from Pune University.
Tarun Gulati
L E A D E R S H I P
Present responsibilities
Tarun Gulati is the Vice President and heads the day-to-day operations of the firm. He devotes most of his time
interacting with clients and developing stock-based compensation solutions specific to their requirements. He leads a
team of Chartered Accountants and MBAs who deliver ESOP Consulting and ESOP Management solutions to the clients.
He also tracks the developments in the field of stock-based compensation in India and in the international arena.
Experience
Before joining ESOP Direct, Tarun has worked with PricewaterhouseCoopers (PwC) in areas related to Corporate Law.
He has also worked with the Indian pet food venture (Brand Pedigree) of the Mars, Inc. group, the global confectionery
and pet food giant. He has authored articles on macroeconomics, international finance and stock markets in
newspapers and other journals.
Qualifications
Tarun is a qualified Company Secretary.
Prachi Worlikar
L E A D E R S H I P
Present responsibilities
Prachi Worlikar is the Sr. Manager – Consulting and is responsible for ESOP Valuation and Accounting Services.
Experience
With her experience in Employee Stock Option Administration, Internal Audit & Finance, Prachi has been associated
with various clients for Design, Implementation & Administration of Employee Stock Option Schemes in compliance with
respective regulations. She has also developed & implemented Software product for Employee Stock Options
Management , calculating Fair Value of Options in compliance with US GAAP (FAS 123(R)). In addition to this, she is also
experienced in Review of Restatement of Indian Accounts under US GAAP.
Qualifications
Prachi is a Certified Public Accountant (CPA) from Massachusetts Society of Certified Public Accountants, USA as well as
a Chartered Accountant (CA) from the Institute of Chartered Accountants of India, New Delhi. She has also completed
Level - II of the Certified Equity Professional course.
Thanks for your time
www.esopdirect.com