Employee stock ownership plan (ESOP)

Employee stock ownership plan (ESOP)

An employee stock ownership plan (ESOP) is an employee benefit plan under which the employees are given the right, called stock options, to acquire the shares of their employer company at a predetermined exercise price. The exercise price, also called grant price, is normally lower than the fair value of the share. The stock option is free at the time of granting as well as vesting and does not cast any obligation on the employee to exercise it. The date on which the employee becomes entitled to exercise the right to acquire the shares is called as vesting date.