{"id":56293,"date":"2025-01-09T15:09:04","date_gmt":"2025-01-09T07:09:04","guid":{"rendered":"http:\/\/wordpress-my-161844363.ap-southeast-1.elb.amazonaws.com\/articles\/?p=56293"},"modified":"2025-01-09T17:58:13","modified_gmt":"2025-01-09T09:58:13","slug":"employee-share-option-scheme","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/employee-share-option-scheme","title":{"rendered":"Are Employee Share Options Worth It?"},"content":{"rendered":"

Usually, when a company is looking for ways to grant incentives for their employees, they\u2019ll turn to the normal, tried and true methods such as bonuses and increments.\u00a0<\/span><\/p>\n

However, in an effort to incentivise better performances from the employee, an Employee Share Option Scheme (ESOS) is gaining more and more popularity among companies.<\/span><\/p>\n

But what is ESOS you ask? We have put together a simple guide to help you make an informed decision.<\/span><\/p>\n

<\/span>What is an Employee Share Option Scheme (ESOS)?<\/span><\/h2>\n

In the simplest of terms, it\u2019s a scheme that allows your employees to acquire shares in the company that they work for.\u00a0 Otherwise, it is popularly referred to as stock options.<\/span><\/p>\n

An ESOS is a form of equity compensation. It allows employees to have some ownership of the company that they\u2019re working in.\u00a0<\/span><\/p>\n

Besides ESOS, there are other schemes such as Equity Incentive Plans (EIPs).<\/p>\n

<\/span>How is ESOS regulated?<\/span><\/h2>\n

In Malaysia, ESOS comes under Bursa Malaysia. As this involves offering shares and equities, the process needs to follow the same financial regulations and corporate governance standards.<\/p>\n

Similarly, the rules governing ESOS comes under the Capital Markets and Services Act 2007 (CMSA). There are also specific Guidelines on Employee Share Option Schemes. This is to ensure proper management of equity incentives for both company owners and its employees.<\/p>\n

<\/span>How does an ESOS work?<\/span><\/h2>\n

If you are the company owner, you grant your participating employees the right to buy a number of company shares at a predetermined price. This will allow them to own shares in the company.<\/span><\/p>\n

However, before the participating employees get to exercise their right to buy company shares, there are a certain set of conditions that they have to fulfil. These conditions can be anything like a prescribed length of time they must work for the company, or performance-based conditions.\u00a0<\/span><\/p>\n

This is important, because it gives the employees higher motivation to stay at the company and perform well in order for them to exercise their rights.<\/span><\/p>\n

Once they have met these conditions, they can\u2019t wait forever though. ESOS comes with a predetermined amount of time before these share options expire.<\/span><\/p>\n

Now let\u2019s look at the benefits of ESOS, and how it helps a company retain their employees.<\/span><\/p>\n

<\/span>What are the benefits of ESOS?<\/span><\/h2>\n

Here are the benefits of an ESOS from the employer viewpoint.<\/span><\/b><\/p>\n