Endowus co-founder shares its twist on lackluster ESOPs

Collin Furtado contributed to this article.

While employee stock ownership plans (ESOPs) are becoming more popular in Southeast Asia as a way for startups to attract talent, the results have been substandard.

One major problem: Employees are locked in for years, or even indefinitely, waiting for an exit like an IPO or acquisition. Exits have also become harder to do in the current economic environment, and without one, workers can’t access any value from their ESOPs.

Image credit: Timmy Loen

But Singapore-based wealthtech firm Endowus says it has a different approach to ESOPs, one that gives employees the ability to buy into the ownership of the company and provide more flexibility with their shares. The results have been positive so far.

According to the company, there has been significant buy-in from employees, who are still its largest shareholders, and there is low staff turnover in key roles.

Of course, Endowus may be uniquely positioned to run such a program as a financial advisory firm with employees more likely to understand investment risks and equity valuations. The firm has also never experienced a down round to test employees’ faith in the scheme. 

That being said, to understand the advantages of the program and to see how other firms could benefit, Tech in Asia spoke with Samuel Rhee, co-founder and chairman of Endowus. This interview has been edited for clarity and brevity.

How does the Endowus ESOP compare to industry standards?

Similar to most ESOPs, full-time Endowus employees are given stock options upon joining the company and at the end of each performance review.

We encourage ownership, so we do have a higher portion of equity than cash compensation naturally. It is also generally what our employees prefer.

However, early on, we saw that many of our employees had either a negative experience with ESOPs at tech companies in Southeast Asia or did not know their true value

See also: ESOPs pick up steam in SEA as tech winter bites

So the key way we differ is by allowing employees to directly buy stocks, not options, in the company.