Why are employee stock option plans important for startups?

On Wednesday, the Securities and Exchange Commission of Pakistan (SECP) officially allowed private companies to offer Employee Stock Option Plan (ESOP) to their employees, which is essentially an effort by the SECP to support Pakistan’s nascent startup ecosystem. 

ESOP is a popular method of attracting, motivating, and retaining employees. Stock option plans permit employees to share in the company’s success without requiring a startup business to spend precious cash. 

But startups in Pakistan have been giving stock options to their employees even before the SECP approval to attract and retain talent. So what makes the SECP’s approval significant? Besides, what value do these stock options have for people who have low salaries and would almost always prefer a higher salary in a country like Pakistan?

 

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Taimoor Hassan
The author is a staff member and can be reached at [email protected]

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