The offering of stocks to employees is an extremely effective method of attracting, retaining, and motivating the employees, more so when a company is not able to offer high pay package. A Stock Option Plan gives the company a flexibility to award stocks to its employees which includes the directors, advisors, officers and consultants, allowing all these people to purchase stocks of the company when they exercise the option.
The Stock Options give the employees an opportunity to get their share in a company’s success without requiring the startup business to spend cash. The Stock Option Plans actually contribute to the capital of a company as the employees pay the exercise price for the options.
Hundreds of people have become millionaires because of the stock options, which makes these options more appealing to the employees. For example, Facebook has helped many employees to become millionaires through the stock options. The huge success of the Silicon Valley companies and their employees who held stock options have made the Stock Option Plans a very powerful motivational tool for the employees to work towards a company’s long term success.
Why the companies issue stock options to the employees
The companies issue stock options for one or more of the below mentioned reasons:
Few key aspects to be considered while offering stock options
A company has to address a few key issues before adopting a Stock Option Plan and issuing the options. Usually, a company adopts a plan which gives it the maximum flexibility. Below mentioned are some of the important factors which need to be considered:
While offering the stock options you need to consider all the above factors very objectively and come up with an equity package which is the best for your company and the employees as well. Being a founder, you should treat your employees like the true owners of the company. The standard equity packages are changing quite rapidly now and you need to be a part of this new wave of treating the employees as the true owner which would help the business immensely in the long run.