esop and employee commitment
TRANSCRIPT
IMPACT OF ESOPs ON EMPLOYEE COMMITMENT
Alka Dwivedi, PhD
Alka Dwivedi, PhD
Scope Objective of the studyTheoretical premiseResearch methodologyFindingsRecommendations & Suggested model
Alka Dwivedi, PhD
Investigative Questions
What leads to commitment among employees?
What all is expected of ESOPs by the HR practitioners?
How are ESOPs instrumental in enhancing organisational performance?
Can ESOPs, if at all, enhance Commitment among employees?
Alka Dwivedi, PhD
Objective of the Study
Studying the organisational factors inducing commitment in employees
Investigate the impact of share ownership on the commitment of employees
Alka Dwivedi, PhD
Conflicting interests ofPrincipal & Agents
Greater the agents share holding
More the alignment of interest
Share Ownership
Interests Aligned
Encourages Profit Maximizing Behavior
Greater employee effort, workplace
innovation, reduction of wastages
Self & Peer Monitoring
Higher Performance&
Higher Productivity
Reduced Monitoring Cost
Alka Dwivedi, PhD
Hypothesis
The employees participating in ESOP schemes exhibit higher levels of commitment to the values of their organisation, than those who do not own ESOPs.
Alka Dwivedi, PhD
Sampling
• Non Random
Sample Unit• Employer
s• Employee
s
Employees• ESOP
Owners• Non
Owners
Alka Dwivedi, PhD
Data CollectionPrimary DataQuestionnairesTelephonic InterviewsIndepth interviews
Secondary Data
Annual ReportsResearch Papers
Alka Dwivedi, PhD
Management’s Responses
Rewarding and retaining more important reasons
rather than
Part of compensationRetirement benefitsTax efficient compensationEmployee ownership
Alka Dwivedi, PhD
Contd.ESOPs for a selected few. Hierarchy Skill criticality PerformanceAlso considering potentialKey employees given some special treatment.
Alka Dwivedi, PhD
Contd.
Allocated 3-6 % of equity capital for ESOPs.
Vesting period from one year to five years.
Ready to change the vesting period of ESOP schemes but none feel that reducing vesting period is a good idea.
Alka Dwivedi, PhD
Contd.Problem during designing phase wasThe size of the organization
Rather than
Lack of expertiseUnderstanding and clarity on tax treatment
Shareholders’ concerns
Alka Dwivedi, PhD
Contd.During implementation Fluctuating share prices is one big hurdle Lack of understanding of working of
ESOPs was the second hurdle.
Not
Lack of awareness or interest among employees
Alka Dwivedi, PhD
Contd. All the companies have changed their
plans since its implementation.
All the companies surveyed feel that the productivity of employees have improved significantly after implementing ESOP in their organisation.
In addition to ESOPs, other benefit plans that companies are offering to employees is variable pay (performance based), placements abroad.
Alka Dwivedi, PhD
Gain from ESOPs1. Retention2. Organisational performance3. Employee productivity4. Commitment
No difference in Absenteeism
Employees’ response
Alka Dwivedi, PhD
Commitment
Job Satisfaction
Motivation
Empowerment
Job Security
Att. Towards Co-worker
Transparency
HR Practices
Career Opportunity
Alka Dwivedi, PhD
Esop owners vs non ownersCommitment – no significant
differenceJob satisfaction- differenceFeeling of job security - no
significant differenceEmpowerment - no significant
differenceCareer opportunities- no significant
differenceAttitude towards coworkers- no
significant difference
Alka Dwivedi, PhD
MERITS OF ESOPs Different merits as told by the employees
are:
• Financial security• Tax benefits• Feeling of belongingness• Commitment• Motivation
Alka Dwivedi, PhD
DEMERITS OF ESOPThe different demerits 0f ESOPs according to the
employees are:
Disparity in distribution
Speculative nature (risk associated)
Apprehensive of the impact of FBT
Does not address the loyalty issue
Alka Dwivedi, PhD
What Employees had to say?
Without ESOP component, the overall compensation package is significantly lower when compared to job opportunities available in the market.
Alka Dwivedi, PhD
Contd.
In today environment where every individual helps the organisation to grow, differentiating who gets ESOPS and when can create a feeling of uncertainty for the other lot. Further prospective people may feel a loss of not being given the ESOPs.
Alka Dwivedi, PhD
Findings No significant difference in the
commitment of ESOP owners and Non owners.
Lower job satisfaction among ESOP owners.
Employers not thinking of reducing the vesting period while employees feel that it would make ESOPs attractive.
Alka Dwivedi, PhD
Possible explanations
Alignment of Interest ???
Amount of Capital owned
Free rider problem
Perception
Alka Dwivedi, PhD
SuggestedModel
ExtrinsicModel
Intrinsic
Model
Alka Dwivedi, PhD
Share ownership
Sense of ownershipAccess to dividends
Involvement in decision making
Satisfaction with firm/ESOP/Work
Employee Commitment
Transparency
Alka Dwivedi, PhD
Footnotes
The sample is too small to derive a general conclusion.
Respondent bias
A longitudinal study may be more predictive.
Alka Dwivedi, PhD
And there is along way to go……