A call option on the common stock of a company is referred to as an employee stock option, it is issued as a form of non-cash compensation. There are restrictions on the option (such as vesting and limited transferability) in order to align the holder’s interest with those of the business’ shareholders. Holders of options experience a direct financial benefit, in case if the company’s stock rises. This provides an incentive to the employees to behave in such ways that will boost the company’s stock price.
Mostly employee stock options are offered to management as a part of their executive compensation package. They are also offered to lower staff, particularly by those businesses that are not yet profitable. They might also be offered to people other than employees: Such as suppliers, consultants, lawyers and promoters for services rendered.
