An employee stock option is a call option

Call option

A call option, often simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option. The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument from the seller...

 on the common stock of a company, issued as a form of non-cash compensation

Remuneration

Remuneration is the total compensation that an employee receives in exchange for the service they perform for their employer. Typically, this consists of monetary rewards, also referred to as wage or salary...

. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder's interest with those of the business shareholders. If the company's stock rises, holders of options generally experience a direct financial benefit. This gives employees an incentive to behave in ways that will boost the company's stock price.

Employee stock options are mostly offered to management as part of their executive compensation

Executive compensation

Executive pay is financial compensation received by an officer of a firm, often as a mixture of salary, bonuses, shares of and/or call options on the company stock, etc. Over the past three decades, executive pay has risen dramatically beyond the rising levels of an average worker's wage...

 package.