GEO INSIGHTS

Employee equity compensation is expanding beyond executives to include employees at all levels, with companies offering more flexible equity options such as performance units and restricted stock. However, increased regulatory complexity, particularly around 10b5-1 trading plans and SEC rules, requires careful planning and compliance. As equity compensation evolves, companies are encouraged to seek external expertise to navigate these changes effectively.

Barclays is granting shares to around 90,000 employees for the first time, offering stock awards valued at £500 each as it prepares to announce its 2024 annual results. The initiative, costing between £45m-£50m, aligns with CEO CS Venkatakrishnan's belief in promoting equity ownership to stimulate markets. The bank is also expected to report progress in its investment banking business, while Venkatakrishnan's own pay package will be adjusted, with bonuses potentially pushing his total compensation above £14m.

A proposal has been made to allow start-ups to defer the tax point for employee share schemes (ESS), aiming to ease the tax burden on employees who may struggle with illiquid shares. The deferral option is not a tax concession, as employees will be taxed on any further appreciation in share value, and employers won’t receive tax deductions until the deferred taxing date. Start-ups are encouraged to provide feedback by March 15, 2025, as this is a rare opportunity to influence the proposal, which may be elective and apply to unlisted businesses with a turnover under NZ$15 million.

Employee Stock Option Plans (ESOPs) are gaining popularity in India, driven by a booming IPO market and increased interest in equity-based employee compensation, with 2024 raising $12.2 billion compared to $6.4 billion in 2023. ESOPs allow eligible employees, excluding promoters and certain directors, to purchase company shares at a discount, and can be structured through either a direct or trust route, depending on the company’s size and listing status. While they offer long-term financial upside and align employee interests with company performance, ESOPs require strict compliance with regulatory frameworks like the Companies Act, SEBI regulations, and tax rules, especially upon exercise and share allotment.

Equinor ASA has initiated a share buy-back program from 14 February 2025 to 15 January 2026 to support its employee share-based incentive plans, with a total purchase amount of NOK 1,992,000,000 and a maximum of 19,080,000 shares to be acquired. The buy-back is divided into two periods, with up to 8,040,000 shares purchased before 15 May 2025 under an existing authorization, while the remaining 11,040,000 shares require new approval from the 2025 annual general meeting. The purchases, conducted on the Oslo Stock Exchange, comply with Norwegian and EU regulations, ensuring adherence to safe harbour conditions.

Employee ownership (EO) has a long history but remains a small part of the global economy, though momentum is growing as businesses, governments, and investors increasingly support broad-based ownership models. This resurgence comes amid rising inequality, workforce dissatisfaction, and rapid technological change, positioning EO as a promising tool to promote economic inclusion, improve employee engagement, and align interests across stakeholders. However, the expansion of EO is mostly centered in developed countries, with emerging markets facing more fragmented and less coordinated efforts despite their high potential.

In January 2025, several prominent companies, including Yes Bank, Swiggy, and Zensar Technologies, allocated significant equity shares under their Employee Stock Ownership Plans (ESOPs), highlighting a growing trend of rewarding employees. As the Indian budget approaches, there is heightened anticipation within the startup and venture capital community for tax rationalization to alleviate double taxation on ESOPs, which could make them more attractive. The shift to a more favorable tax environment for ESOPs is seen as a key strategy to incentivize talent retention and boost India's startup ecosystem.

As India's 2025 union budget approaches, investors are calling for tax relief on Employee Stock Ownership Plans (ESOPs) to make the startup ecosystem more employee-friendly, emphasizing the need to eliminate double taxation. Currently, ESOPs are taxed both when exercised and when shares are sold, which discourages employees from fully benefiting from these options. Investors argue that taxation should only occur when a gain is realized, aligning India's tax policy with global standards and fostering a more attractive environment for talent retention in emerging sectors like AI and spacetech.