Are stock options a means to retain valued employees?

Employee stock option is an option or right given to the employee to buy stocks of the company at a pre-decided price during a fixed period of time, say 10 years. The employee might exercise his option when he finds the current market price of the company’s stocks higher than the price of the option. The aims of this kind of program are:
1. To improve employee’s efficiency: As the employee is made an owner of the company by entitling him to buy shares of the company, it would be an incentive for him to work as the progress of the company would imply his progress. The attrition rates might be reduced too, as the employee has been bonded by the company. The employee has too sell his shares or revoke the option if he decides to exit the firm, which might at as a deterrent if the market price are less than the option price.
2. As a perk to the employee: ESOPs can be seen as perks or bonus given to the employees. Some ESOPs are transferrable and exempted of tax. The profit an employee gets on selling the stocks bought by exercising the option can be tax exempted if earned after a certain period of time.
Well I don’t have much knowledge about this ESOP, I heard this a lot in newspapers that the PM has introduced some Fringe benefit Tax on ESOP. Now I’m still trying to figure out what this FBT is, will let you know once I get my hands on something.