Indian CEOs prefer Esops despite choppy stock market

MUMBAI: Despite a choppy stock market and an overall adverse economic climate, Indian CEOs and senior executives still prefer employee stock options (Esops) over deferred cash, according to a study conducted by a global consulting firm, signalling the high risk appetite of the Indian top brass.

As many as 53% of senior executives in India were willing to take the risk of opting for shares as opposed to bonuses coming in behind only the Chinese (58.2%) and American (56.6%) executives, a PwC report on executive pay said.

The study, shared with TOI and conducted along with the London School of Economics and Political Science, found that while executives around the world were willing to take a 28% pay cut for their ideal jobs, Indian executives were ready to forgo 24% of their salaries, making them the least willing among their global peers to go for a salary cut.


Esops are largely exercised over a 3-5 year horizon and are used as a long-term incentive by employers to retain talent. Restricted stock units is another form of equity-based incentive which is becoming popular among Indian firms. A stock option provides an employee the right (but not the obligation) to purchase the company's shares at a predetermined price. "It is interesting that executives in the BRIC nations tend to prefer shares over cash.

Although, both cash and shares are deferred, so if they have to be locked into the deferral, perhaps they are inherently more optimistic about the upside that shares provide," said Padmaja Alaganandan, executive director, PwC.

The findings confirm that people largely prefer more certain but less generous over less certain but a more generous outcome, she said. "CEOs in Indian conglomerates are far more confident in terms their company's growth prospects — both topline and bottomline — despite the slowdown. This is clearly not the case in the European markets prompting the western senior management to opt for safer, guaranteed short-term and long-term compensation," said Nishchae Suri, MD, Mercer, a global HR consulting firm. Still, not many companies have been able to take Esops across to a broader employee base.

In a recent survey released by Esop Direct, half of 115 Indian companies said they gave out stock options to less than 10% of their employees. "In India the mindset, cash compensation takes care of day-to-day living costs while variable pay is a big motivator to get some extra earnings. This is where Esops are seen as an opportunity of long-term wealth creation among Indian executives," said R Suresh, CEO, Stanton Chase, an executive search firm.

Perked up:
50% of the executives in India choose a clearer pay package
Executives in India prefer deferred shares over deferred cash
Indian executives were least willing to accept a pay cut for their ideal jobs
While globally executives were willing to take around 28% pay cut for their ideal job, Indian executives were willing to forgo only 24%