Question

Food and grocery delivery company, Swiggy announced a programme before its Initial Public Offering (IPO). This programme allows employees to buy a portion of their company stock option for a combined total of up to $ 65 million.

Identify and explain the financial incentive given to the employees.

Answer 1

Swiggy’s pre-IPO Employee Stock Option Plan (ESOP) provided financial incentives for employees to purchase up to $ 65 million in company equity.

Employee Stock Option Plan (ESOP): An ESOP is a financial incentive offered by a company to its employees. It allows them to purchase a certain number of shares at a discounted price (typically below market price) during a set period of time. This option is offered to employees who meet specific eligibility conditions. (Example period of service.) Permanent and important managerial personnel are typically eligible for ESOPs.

Some merits of the stock option scheme are:

1. This system can serve as compensation for employees’ performance.
2. It encourages employees to work even better.
3. It promotes morale and teamwork among employees.

Some limitations of ESOP are:

1. Stock price fluctuations might cause losses for employees.
2. Implementing an ESOP is a costly undertaking.
3. The lack of transparency in this approach allows for favouritism.