Schrodinger’s cat and ESOP


Schrodinger’s cat reminds me of stock option plan of one of my earlier companies.

In 1999, IT companies were proliferating, each aspiring to be next Infosys. I was asked to design compensation plan for my organisation. Fresh from SIBM, I started working on it with great enthusiasm.
After meetings with chartered accountants, pouring through Taxmann publications on Income tax, compensation survey by Info edge and advisors from Kirtane Pandit Consultancy Services, the plan was ready. CEOs (we had two!) approved it.

Everyone was keen on ESOP scheme. KPCS gave presentation on scheme- you are allocated options, after vesting period (in meantime company was supposed to get listed and come up with IPO) you can sell it at prevailing price, pay tax and difference is your income- employee had nothing to lose, everything to gain.

By year 2000, allotment letters were issued, hopes were high. After all company of similar size – Cyberspace Infosys – had gone public; its share was quoting at Rs.1300. So in next 3 year our share would touch 1000. My 300 shares (100 each year) will be worth 3, 00,000!

But soon scheme took form of Schrodinger’s cat. Everything was uncertain about company going public, share price post listing and its movement over period of time.
There were variety of opinions ranging from company will never go public, to IPO will flop to share price will just zoom… so like Schrodinger’s cat different scenarios existed – all at same time. Cat was alive and dead. Ditto our hopes.

When box was finally opened in 2001, (recession had started by then) cat was dead. Going public/listing was out of question, very survival of company was at stake.

FYI- Owner of Cyberspace Infosys landed in jail for fraud!

Something about Schrodinger’s cat…
Those who didn’t study physics at graduate level may not be familiar with this term. Erwin Schrodinger was physicist who did significant work in field of quantum theory.
He conducted a mental experiment, where a cat is placed inside an opaque box along with radioactive material and poison flask. It is so designed that decay in atom will result in shattering of flask and cat gets killed. Till the box is opened you don’t know if cat is alive or dead, all states are possible – cat is alive and dead. It is only when box is opened that superimposition ends and reality collapses into one possibility or other i.e. cat is either alive or dead.


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