The service industry has seen a tremendous rise in the
trend where the entrepreneurs joining an organization are also involved in
purchasing some stake of the organization upfront. The benefit of taking part
in the equity shareholding is that a person who is working for the organization
earns his emoluments for the services offered by him and also enjoy the benefit
of wealth creation as and when the share of the company scales up in the
market. The major benefit of the practice is that the employee who has been
working to earn his pay-scale will now have degree of independence in taking
the decisions. An example of Centrum Wealth
Management will make the things crystal. The employees who are also
shareholders in the Centrum Wealth Management sometimes save money by
travelling by auto-rickshaw instead of cabs in order to save some money to the organization.
Many working as such believe that there is no hesitation in saying that their
wealth has been created due to the stock options held by them in the organization.
Karan Bhagat who is MD and CEO of IIFL Wealth Management is also holding equity
shares in the company which have a current value of around Rs 90 crores. Such a
tremendous increase in the wealth creation has encouraged many to take this
road. There are types of options available to an employee of the organization brief
of which are as follows:
a. MSOP (Management Stock
Options Plans): Management Stock
Options Plans help key management personnel, mostly CEOs, get an upfront stake
in the company.
b. SOP (Stock Option Plans): Most CEOs also have a normal sweat equity plan alongside
where more options to buy shares are vested with them on a certain date that can
be exercised later.
c.
SAR (Stock Appreciation
Rights): Every year, some equity
shares are allotted but only to the extent of appreciation of value between grant
and exercise date.
d. Warrants: Some firms used warrants convertible in future to vest
shares with employees at the time of joining.
e. Full Value Shadow
Equity: An employee is assumed to
hold the equity shares and at some agreed point an employer virtually buys back
the equity paying the current listed price of price determined by valuation
under an agreed scheme.
f. Phantom Equity: Actual equity shares granted but an employee is assumed to
hold an agreed amount of shares and is paid a bonus equivalent to the increase
in the share price of valuation.
