This is one of the factors, peer pressure, that influence the decision. However, the more important drivers are willingness to dilute shareholding, readiness to sustain the Plan over a long run, possibility of providing liquidity to the shares, do the employees see same value in becoming shareholder as the other shareholders.
ESOPs can be implemented anytime whether you are a startup or a growth stage or a steady state, established company. It is ideal to time the roll out prior to some major Capital raising events such placement of Equity with a PE/ VC or strategic investor or before the IPO- before a market driven price discovery happens. In the absence of such events, ESOPs can also be rolled out when there is some visibility of providing liquidity to employees.
Some of the visible advantages of implementing ESOPs are retention, performance linked rewards, (usually) market pays for the gains and not the company, facilitates shared vision as shareholders. ESOPs however, can work to the disadvantage, if not implemented professionally, seen to be subjective and not objective, lack of transparency.
