Employee Stock Ownership Plan (ESOP) is all the rage in the Indian startup ecosystem these days. And rightly so. Nearly 3200 crores have been bought back since July 2020, according to the Economic Times. There is a sudden surge in wealth creation among the startup community.
ESOPs help retain talent and spur individuals to rally for the company. As more companies IPO, and orgs introduce buybacks, ESOPs can be a strong wealth creator. What was once looked at as a piece of document to cage employees, is now a formidable hiring and retaining tactic.
Meeshoites are all too familiar with ESOP buybacks. We’ve done three so far for our talented employees.
- February 2020 - Valued at $1 million (Rs 7 crore)
- December 2020 - Valued at $ 5 million (Rs 37 crore)
- November 2021 - Valued at $5.5 million (Rs 42 crore)
What’s better than having a sense of ownership?
Literal ownership, of course. 💪
But I'm getting ahead of myself. Let’s first understand what ESOPs are.
What are ESOPs?
ESOPs are a Long Term Incentive plan that allows high-performing employees to buy stock and become shareholders of the company. It’s a loyalty programme. It helps employees grow wealth as a company grows. As ‘shareholders’, employees act in the best interest of the company. It also gives founders some leeway in hiring exceptional talent.
As great as they are, ESOPs can be a double-edged sword. Industry standards like graded four-year vesting periods turn ESOPs into a deterrent for wealth creation, rather than a catalyst. 😔 They can be prohibitive in nature.
At Meesho, we employ straight line vesting.
Meeshoites get 25% of their ESOPs vested after the completion of the very first year. 😍
After 1 year, the employees get vested ESOPs every single month for 36 months, thereby effectively scrapping the annual wait for the remaining ESOPs.
We believe this is the right way to approach ESOPs. It allows employees to cash-in when they want, or HODL (hey there, crypto peeps 😝) and vest their shares whenever they deem fit, if they believe in the company. We’re giving back this power to our employees. 🤗
Now that Meesho is valued at $4.9 billion, (as of publishing this article 🤫) we wanted more folks to participate in our growth. We went back to the drawing board and asked, how can we get each and every employee the option to participate in our growth story.
And that’s how MeeSOPs were born.
A portmanteau of Meesho and ESOPs.
What are MeeSOPs?
MeeSOPs have some similarities to ESOPs:
- Is a wealth-creation opportunity for employees
- Will inculcate higher ‘ownership’ amongst Meeshoites
- Will enhance employee retention
- Will motivate employees to have vested interest in the growth of the company
Here is what sets MeeSOPs apart:
MeeSOPs gives every employee, regardless of their seniority or designation, the choice to convert a percentage (up to 25%) of their Annual CTC into ESOPs.
But that’s not all. For the amount each Meeshoite converts to ESOPs, we add a top-up - this can be anywhere between 15-25%, based on the employee’s tenure. In effect, we’re sweetening the deal, by increasing the value that can be converted to ESOPs.
Here is an example:
But… that’s not all 😎
- When Divya apportions some MeeSOPs from her CTC, her monthly Tax Deducted at Source (TDS) also reduces accordingly.
- MeeSOPs come with zero tax liability, at the time of stock grant and vesting.
*Taxes will be applicable at the time of exercise and sale.
- MeeSOPs will follow the same competitive vesting cycle as ESOPs. In fact, Divya can vest 100% of her MeeSOPs within a year from grant date!!
All in all, MeeSOPs is an industry first, and helps Meeshoites get richer for all the incredible work we do. ☺️ So, forgive us, if we are being a little cocky about MeeSOPs, but we’re super kicked about this new policy.
One of Meesho’s mantras is - “Act like an Owner”. But having these mantras means nothing if we can’t practice it. As an organisation, we need to show these mantras in actions. MeeSOPs is one way we’re rewarding Meeshoites by... 🙏🏻
Practicing what we preach 🙌🏻
Our Co-Founder and CTO, Sanjeev Barnwal puts this succinctly:
In April 2022, we launched MeeSOPs 2.0 with the following benefits:
- Employees can convert up to 33% of their CTC into MeeSOPs
- The MeeSOPs value can increase by 20-40% more the amount invested by the Meeshoite based on their tenure
- MeeSOPs 2.0 grants will start vesting from 24th April 2022 and vest 100% at the end of 6 months from then