How can I reward employees without diluting existing shareholders?

Growth shares with a hurdle are the usual answer: employees only share in value created above a set threshold, so existing shareholder value is protected. Exit-only options mean dilution only bites at the point of sale, and performance targets can ensure that any dilution is matched by growth in value.

An Employee Benefit Trust can also be used to ringfence a set number or percentage of shares. And if you would rather not give up equity at all, phantom shares or a cash-settled Long Term Incentive Plan can track share value without issuing any, but may not be as tax efficient.