Stock options are experiencing a resurgence. Here’s the reason behind it.

Stock options are making a comeback in the corporate world, especially for middle and senior management positions in startups and traditional companies. The period from January to May 2024 has seen a significant increase in the allocation of Employee Stock Options (ESOPs) compared to the same period last year. According to data from the Capitaline database, 461 listed companies have allotted 340.5 million shares through ESOPs, up from 253.9 million shares allocated by 382 companies in the previous year.

Leading the way in ESOP grants is Zomato, with 116 million ESOPs granted between February and May. Other notable issuances include Eco Hotels, CMS Info Systems, Infibeam Avenues, and Home First Finance. The renewed interest in ESOPs can be attributed to various factors, including the surge in the stock market for SMEs and technology companies, the revival of the startup ecosystem, and the increase in initial public offerings (IPOs).

Companies are also exploring different types of stock options, such as performance stocks and restricted stock units (RSUs), to attract and retain top talent. While ESOPs in startups are seen as a short-term incentive, some experts believe that not everyone sees stocks as a lucrative way to make money. Despite the popularity of ESOPs, there is still a preference for more guaranteed forms of compensation among a significant portion of employees.

Overall, the resurgence of ESOPs highlights the evolving landscape of employee benefits and compensation in the corporate world, with companies adapting to attract and retain talent in a competitive market.