The recent article on Nvidia highlights a powerful corporate lesson: when employees participate in the long-term value creation of a company, wealth creation is not restricted to founders and investors alone. Yahoo Finance reported that a significant portion of Nvidia employees have become millionaires due to the company’s long-running stock-based compensation culture and extraordinary share-price growth.
For Indian companies facing a dip in their share price at the stock exchange, this may appear to be a difficult time to talk about ESOPs. However, in reality, a depressed share price can be one of the most strategic moments to introduce, refresh, or restructure an ESOP plan.
The Indian Context: Share Price Dip Is Not Just a Market Issue
When the share price of a listed company falls, the impact is not limited to investors. It also affects employee confidence, leadership morale, market perception and retention of key talent. Employees may start questioning the company’s future, competitors may attempt to attract high-performing talent, and existing ESOPs may become unattractive if the exercise price is higher than the current market price.
This is where ESOPs can act as a bridge between today’s uncertainty and tomorrow’s growth.
ESOPs are not merely a compensation tool. It is a long-term ownership instrument. It tell employees: “The current market price may be low, but the company believes in its future—and wants you to participate in that upside.”
Why a Falling Share Price Can Be the Right Time for ESOPs
A lower share price allows companies to design ESOP grants at a more attractive entry point for employees. If the company’s fundamentals remain strong but the market price has temporarily declined, employees get a chance to participate in future value creation from a lower base.
For the organisation, this becomes a retention and motivation tool. Instead of increasing only cash compensation, which creates immediate cost pressure, ESOPs create a future-linked reward structure. Employees benefit only when the company grows, performs and the market value improves.
This creates alignment: management works for recovery, employees work with ownership, and shareholders benefit from a committed workforce.
Retention Through Ownership, Not Just Salary
In today’s talent market, employees are not only looking for monthly salary. Senior leaders, technology teams, business heads and high-potential employees want wealth creation opportunities. ESOPs convert employees from mere participants into stakeholders.
A well-designed ESOP can support retention through:
- Vesting-linked continuity
Employees stay invested in the company because their options vest over time. This naturally reduces sudden exits and supports long-term association. - Performance-linked reward
ESOPs can be linked with individual, departmental or company-level performance milestones, ensuring that ownership is earned through contribution. - Wealth creation possibility
Unlike fixed salary, ESOPs offer potential upside. The Nvidia example shows how stock-based rewards can create life-changing wealth when employees stay through the company’s growth journey. - Emotional ownership
Employees who hold or expect to hold shares think differently. They become more conscious of profitability, customer satisfaction, innovation, cost discipline and governance.
ESOPs Help Companies Preserve Cash During Difficult Times
When share prices are under pressure, companies may also face investor scrutiny, margin pressure or limited ability to increase salaries aggressively. ESOPs provide a practical solution.
Instead of using only cash bonuses or salary hikes, companies can offer a combination of fixed pay, performance incentives and ESOPs. This helps conserve cash while still giving employees a meaningful long-term reward.
For growth-stage and listed companies, this can be especially useful where the company wants to retain critical talent but also maintain financial discipline.
What About Existing ESOPs That Have Become Unattractive?
Many Indian companies may already have ESOP schemes where the exercise price is now higher than the market price. Such options are commonly called “underwater options.” In such cases, employees may feel that the ESOP has no real value.
Under SEBI’s Share Based Employee Benefits and Sweat Equity Regulations, 2021, repricing of options that have not been exercised may be considered where the scheme has become unattractive due to a fall in share price, subject to regulatory conditions and shareholder approval.
This means companies should not allow old ESOP schemes to become dead documents. They can evaluate repricing, fresh grants, performance-based grants, RSU-style structures, SARs or other share-based instruments depending on their regulatory, accounting and commercial feasibility.
Why Indian Companies Should Not Wait for the Share Price to Recover
Many companies make the mistake of thinking that ESOPs should be introduced only when the company is doing extremely well. But by then, the upside for employees may already be limited.
The better approach is to create ownership when the company is rebuilding value. Employees who join or stay during difficult periods should get the opportunity to participate in the recovery.
This is the difference between a salary culture and an ownership culture.
A salary culture says: “Work for us.”
An ownership culture says: “Build with us.”
Indian Examples Show the Shift Toward Broader Employee Ownership
India is already seeing wider adoption of employee ownership. Vedanta reportedly created a cumulative ESOP-linked financial impact of around ₹2,500 crore over five years by offering discounted stock options and expanding ownership beyond senior management.
Mahindra also announced anESOP grant covering thousands of employees, including shop-floor workers, showing that equity participation is no longer limited to the top layer of management.
This shift is important for Indian companies. ESOPs are moving from being a “startup perk” to becoming a mainstream retention, reward and ownership strategy across listed companies, manufacturing businesses, financial services companies, technology companies and new-age enterprises.
How ESOPs Benefit the Organisation
For the company, ESOPs can help in five strong ways:
Retention of key talent: Employees are more likely to stay when future wealth is linked to continued service.
Reduced cash burden: ESOPs supplement compensation without immediate cash outflow like salary hikes or bonuses.
Performance alignment: Employees benefit from the company’s improved performance and value creation, thereby aligning their interests with those of shareholders.
Positive market signalling: A thoughtful ESOP plan signals confidence in the company’s future.
Leadership continuity: ESOPs can be used to retain CXOs, senior managers, and critical teams during turnaround or growth phases.
How ESOPs Benefit Employees
For employees, ESOPs provide more than compensation. They provide participation.
They get an opportunity to own part of the company they are helping to build. If the company recovers and grows, the employee does not remain only a witness to that growth but becomes a beneficiary of it.
This is especially relevant in a falling market. When share prices are low, the potential upside can be more meaningful if the company’s long-term business fundamentals remain strong.
The Right Way to Design ESOPs in a Falling Market
Companies should avoid treating ESOPs as a simple grant of options. The scheme must be carefully designed. A strong ESOP framework should include:
Clear eligibility criteria for leadership, critical talent, and high performers.
Reasonable exercise price considering market conditions, employee motivation, and stakeholders’ fairness.
Structured vesting period to support retention over three to five years.
Performance conditions wherever suitable, especially for senior management.
Repricing or refresh mechanism for underwater options, subject to law and approvals.
Transparent employee communication explaining tax, vesting, exercise, and exit mechanics.
Digital ESOP administration to avoid manual errors, poor communication, and compliance gaps.
Why Companies Should “Go With This” Now
Indian companies facing a dip in share value should consider ESOPs because this is exactly the time when employees need confidence, not only comfort. A share price correction can create fear, but a well-structured ESOP can convert that fear into belief.
It tells employees that the company is not only asking them to stay but is also inviting them to share the future upside.
The Nvidia story is not merely about wealth. It is about what happens when a company makes employees part of its value creation journey. Indian companies may not replicate Nvidia’s scale, but they can certainly adopt the principle: ownership creates commitment, and commitment creates long-term value.
Conclusion
A falling share price should not stop Indian companies from issuing ESOPs. In many cases, it should encourage them to act faster.
ESOPs can help companies retain talent, conserve cash, rebuild morale, align employees with shareholders and create a long-term ownership culture. For employees, they create a chance to participate in future growth. For organisations, they create a committed workforce that thinks like owners.
In difficult markets, companies do not need only employees who work for salary. They need employees who believe in the comeback. ESOPs can become the instrument that turns that belief into ownership.
