An Employee Stock Ownership Plan (ESOP), Phantom Shares, and Stock Appreciation Rights (SARs) are powerful tools for aligning the interests of employees with those of shareholders and for driving company performance. However, the true power of these instruments lies not just in their existence but in their visibility to the employees. Without a clear, real-time view of how shares are vested and the value of their shares, the potential of the ESOP pool could be significantly underutilized.
Creating an ESOP pool is not a trivial undertaking. It demands a considerable investment of time and resources from the company and requires the consensus of existing shareholders. It is a strategic move, underscoring the importance of ensuring that this effort is both recognized and valued by the employees who are its beneficiaries.
This is where Capboard steps in, putting ESOPs and Phantom Share plans on autopilot. It automates the intricate details of vesting schedules, valuation changes, and conditional triggers, thus reducing the administrative burden and margin for error that a manual process like Excel presents. With Capboard, errors are not just reduced; they are actively prevented, ensuring that the integrity of your ESOP management remains intact.
Capboard provides a dual-sided window: full visibility for the company’s CEO and CFO to oversee the entire equity landscape, and a personalized dashboard for each employee to track their individual stake in the company. This level of transparency fosters a culture of ownership and motivation, as employees can see their shares grow in real-time, paralleling the company's success.
Moreover, ESOP management does not culminate with board approval. That is where it begins. It spans all the way to a liquidity event or a company exit, which can represent 5% to 15% of the company’s cap table. It’s imperative to manage this substantial portion with a tool designed to sidestep errors and enhance visibility.
The attached image illustrates an example of the employee view with Capboard. Here, an employee can effortlessly track the issued share value, their personal investment, company ownership percentage, and the current price per share. The graph detailing 'Your shares value evolution' provides a visual representation of the growth in their investment, offering a tangible connection to the company's trajectory.
In conclusion, the decision to create an ESOP pool should be met with an equal commitment to maintaining its visibility and understanding among employees. Capboard embodies this philosophy, ensuring that the ESOP pool is not just a line item on a contract but a living, growing testament to the value and appreciation of every employee’s contributions to the company's success.
by Alex Bisbe