Most equity offers are made before the math is done.

Founders and HR teams frequently reach out to us after extending an offer – “We have promised 5–6% equity to new hires” or “₹50 lakhs worth of ESOPs to a CXO - can you help us put a scheme around it?”

But a scheme is just documentation. What they really need is a framework — one that defines who receives equity, how much, and on what terms, based on business goals, pool constraints, and financial impact.

In our experience, most equity over-commitments occur at the hiring stage driven by urgency, negotiation pressure, or industry benchmarks. The dilution regret, misalignment, and P&L strain tend to surface later — when it’s too late to walk back on what was promised.

Before you roll out your next offer, consider the following to avoid these issues later:

Decision Area Common Practice Veritas View
Who to offer and when?
  • Offered by default to all early-stage, senior and CXO hires.
  • Grants typically made effective from date of joining
  • Offer ESOPs at hiring but stagger the grants into yearly tranches instead of making a big grant upfront.
  • For CXOs and strategic roles, make grants effective from joining but with back-ended / milestone-based vesting.
  • For other hires, commit upfront but make grants effective post-probation or after 12 months, once contribution is visible.
How much to offer?
Most critical aspect.  
  • Sizing typically follows:
    • % of Equity: Common at early and CXO stage, often based on external benchmarks without grant math.
    • Fixed ₹ value: Common for mid to senior hires, easy to communicate but often unclear if it reflects market or intrinsic value (post exercise price). At low share prices, it typically leads to excess equity.
  • Both approaches often result in over-allocation and high P&L cost as neither factors in the Company’s business plan.
  • Validate your grant logic using the Future Wealth Creation Approach — the only method that factors in your business plan, exercise price, and target wealth per role – then back-solves the ESOP quantum.
    • Adaptable to any growth stage by adjusting target wealth based on role and business risk.
    • Even if starting with a % or ₹ anchor, validate your grant size using this approach and rebalance if the output shows a material mismatch with your growth plan.

*Note: If ESOPs are being used to replace real CTC, grant logic must factor liquidity loss.
Decision Area Common Practice Veritas View
Offer Process & Alignment
  • Offers are made during negotiation – frameworks are built only after company scales.
  • Vesting follows standard 4-year, 25% annual schedule – regardless of role, grant size or business context.
  • Financial impact is assessed only when grants are prepared.
  • Set ESOP hiring budgets – just like compensation – to manage pool and charge.
  • Use hiring calculators to bring data-driven logic into grant decisions: simulate value, dilution, and cost before the offer goes out.

Before you commit equity in an offer letter, make sure the math and the logic are already in place.

This note is part of our ongoing Veritas ESOP Insight Series, drawn from our work with companies across different stages of growth.

We hope you find it useful as you refine your reward and equity frameworks.

Vichitra Malhotra

Should you have any comments or thoughts or feedback, please feel free to share write to us. We would love to hear from you!

Vichitra Malhotra, FIAI

Founder and Consulting Actuary

v.malhotra@veritas-india.com

+91-9372876627

Disclaimer: The above content has been furnished solely for information and must not be reproduced or redistributed. It should be noted that we are not soliciting any action based upon it. Also, it does not constitute any recommendation. In particular, the information above is for general purposes only and is not an advice on employee stock option solutions valuations or preference of one scheme over another. The information given above is in summary form and does not purport to be complete. We have reviewed the above and in so far as it includes information or facts, it is believed to be reliable though its accuracy or completeness cannot be guaranteed.