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Long-term incentives (LTIs) such as Employee Stock Option Plans (ESOPs), Restricted Stock Units (RSUs), and Stock Appreciation Rights (SARs) have become increasingly significant. Companies are adopting these incentive plans to link employee performance with organisational goals. The adoption of these incentives rose to 75% in 2024 from 63% in 2020, highlighting their growing importance.
Grant Thornton Bharat’s survey on long-term incentive plans, engaging participants across sectors, underscores this trend. The report Equity linked incentives 2.0: Changing landscape of employee stock option plans (ESOPs) in India based on a survey of listed and unlisted companies across sectors, provides insights and benchmarks for business leaders to adopt suitable LTIs for attracting, retaining, and creating ownership among critical talent.
Leading sectors: IT and financial services have led the adoption of long-term incentive plans since the late 1990s. Recently, LTIP adoption has increased in the manufacturing, consumer retail, and e-commerce sectors, extending benefits beyond traditional white-collar roles typically found in management/technical positions.
Popular incentives: Employee Stock Option Plans (ESOPs) are the most popular equity-based incentive plans because they offer flexibility to both employees and employers.
Stock Appreciation Rights (SARs): Incentive plans such as SARs are favoured by organisations looking to conserve their equity pool.
Restricted Stock Units (RSUs): Early-stage companies and large multinational corporations often adopt RSUs, which differ from ESOPs as they are usually given at a significant discount or at face value. RSUs and SARs are commonly used in conjunction with ESOPs rather than as standalone instruments.