Employee Stock Option Plan

An Employee Stock Option Plan (ESOP) is a benefit program that gives employees the opportunity to purchase company stock at a predetermined price, typically below market value. The plan document outlines eligibility requirements, vesting schedules, exercise periods, and tax implications. Stock options serve as a powerful retention tool and align employee interests with company success. The plan specifies the number of shares allocated, strike price, vesting milestones (often time-based or performance-based), and what happens to options upon termination or company sale. ESOPs are particularly common in startups and tech companies as a way to attract talent when cash compensation may be limited.