ESOP or employee stock option plan – is an employee incentive (benefit) plan intended to encourage employees to acquire ownership in the company. Stock options allow employees to purchase the company’s shares in the future at a fixed (usually discounted) price. This means employees can convert their options to shares at a price lower than the existing value of shares, the difference being the reward for the employees.

Stock option plans motivate employees to perform better, promote incentive-based compensation, align employee interests with the company vision and growth, thus creating value for both company and employees.