L&T, ICICI Bank and Infosys lead on ESOPs. Nifty 12's top deck get richer by Rs 8718 crore

Mumbai: A staggering amount of wealth was created by the upper echelons of corporate India over the last two years even as tough economic conditions loom large over the payouts of the broader employee base.

A total of about ₹8,717.65 crore was potentially made over the last two fiscals by the senior-to-top management of 12 large-sector frontliners in the Nifty 50, showed the data put together for ET by ESOP Direct. About 100 million options were issued - mostly to senior management - in FY22 and FY23 by these 12 companies. It's not clear how much of the Esops were encashed.

Wealth creation was led by L&T and followed by Infosys, ICICI Bank, JSW Steel, Bharti Airtel, ITC, UltraTech Cement, Bajaj Auto, Reliance Industries, UPL, Asian Paints and Dr Reddy's Laboratories, on the basis of the number of options issued.


Also read: Getting an ESOP in your next job? Here's how an ESOP works, risks involved and tax implications

These companies have created wealth for Esop holders in the range of ₹58.93-4,011 crore, according to the data.

Uptrend in Stock Market
The biggest issuers of FY22 and FY23 were L&T, ICICI Bank, and Infosys.

Board members and compensation experts said that an uptrend in the Indian capital markets has given large companies an opportunity to offer significantly higher salaries to the top management in the form of stock-linked variables as they seek to attract and retain key personnel.

"The top brass of India Inc are in the money with increasing focus on stock-linked variable components such as Esops in senior management pay," said Jalaj Sinha, head, business development, Esop Direct. "An increasing number of listed traditional sector companies are using Esops to reward and retain top talent."

It's a matter of recognising the contributions of key people.

"There must be a nexus between effort and reward," said Sanjiv Mehta, former chairman and CEO of Hindustan Unilever Ltd (HUL). "Esops or share grants strengthen this nexus. Providing this benefit down the line also helps build the owners mindset in the organisation."

Several directors at large established companies said they had to reconfigure compensation packages - with a higher focus on stock-linked earnings - to retain senior professionals.

"War for talent is being won by those who can promise and deliver wealth creation," said Shailesh Haribhakti, chairman of audit and accounting firm Haribhakti & Co, who is also an independent director of several Indian companies.

Stock options are central to the manner in which startups reward key employees.

"The startup community in a way contributed to this trend. It was getting increasingly difficult to retain top talent," said the CEO of a top infrastructure company seeking anonymity. "Esops made them direct stakeholders in the company's growth."

Experts said a parallel uptrend in the capital markets boosted wealth creation. The stock market has gained 14% in the past year and nearly 8% in the past two years.

"There is so much anticipation of the markets doing well in the next five-seven years and this also gives an opportunity to companies to link the fortunes of CXOs to the fortunes of the firm as Esops are becoming an increasingly strong component in senior executive pay," said Arvind Usretay, senior director, commercial leader, India and South Asia, Mercer Consulting. "Variable pay as a concept has picked up consistently in manufacturing and traditional sector companies."

Driving performance and nurturing talent are two sides of the same coin for corporates in India, said Suresh Narayanan, chairman and MD, Nestle.