Rising stock markets made India's top CXOs richer by over Rs 10,300 cr: Report

India’s top executives and senior managers at leading companies saw their wealth surge by more than Rs 10,300 crore as of August 30, thanks to the success of employee stock options (Esops), Economic Times reported citing a report by Esop Direct.

Over the past two fiscal years, around 90 million Esops were issued by 12 major companies in the Nifty 50, including Infosys, ICICI Bank, JSW Steel, Dr Reddy’s Laboratories, and Bharti Airtel.

“The data shows an increasing trend among listed Indian traditional sector companies to use Esops to reward and retain top talent by aligning their wealth creation with that of the company’s growth," Jalaj Sinha, head, business development, Esop Direct, was quoted as saying.

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Companies have shifted towards stock-linked incentives to counter rising competition for talent. “Esops make senior professionals stakeholders in the company’s success,” said Milind Sarwate, an independent director at Asian Paints and other major firms.

The report estimates that wealth creation from Esops in FY23 and FY24 ranged from Rs 26 crore to Rs 3,254 crore across the analysed firms.

While it is unclear how much of these Esops were encashed, experts suggest the increasing use of restricted stock units (RSUs) and discounted options has bolstered executive earnings.

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Economic Times quoted Navnit Singh, regional managing director for India at Korn Ferry, as saying that industrial and manufacturing firms have also embraced long-term stock incentives, reconfiguring executive pay packages to focus on wealth creation. Companies understand if they have to attract and retain talent at the top they have to give stocks. Otherwise the cost of acquisition of new talent from outside (if they lose talent) becomes double or triple," Singh said.

The gap between executive compensation and broader staff pay is widening, industry experts noted, with companies increasingly turning to stock-linked incentives to avoid higher payouts from profit and loss accounts.