Fostering a more diverse, equitable and inclusive workforce has become a key initiative for many public and private companies. Much of the effort on this front has been put towards improving workplace culture and hiring practices; however, compensation (both annual salary and equity) remains a continued area for improvement.
In Shareworks latest research study, “Transparency 2021: Addressing Gaps in Equity Compensation,” we found some eye-opening compensation gaps that exist between various employee demographics. One such group that has been disproportionally impacted were Black, Indigenous, and People of Color (BIPOC).
Among surveyed employees who currently participate in an equity plan, only 15% identified as Black/African American, less than 3% identified as Hispanic/Latino, and less than 3% of identified as Indian American/Native American. Analyzing equity compensation as a whole, we found that recipients of equity at public and private companies were overwhelmingly White/Caucasian (62%).
Source: Shareworks by Morgan Stanley (2021). Transparency 2021: Addressing Gaps in Equity Compensation (8)
Part of this trend can be explained by the significant underrepresentation of BIPOC employees in positions of seniority. Within an organization, senior roles are most likely eligible for higher-value equity; historically, these roles have been occupied by men, and more accessible to Whites/Caucasians than to minorities.
Analysis found that the underrepresentation of BIPOC employees has had a significant impact on equity compensation. Among Black respondents, for instance, 25% held individual contributor positions (positions that are not on a management track within an organization), with only 21% ranking SVP or higher. Furthermore, 40% of black respondents reported being issued 4% or less of their total compensation in equity stock options.
Source: Shareworks by Morgan Stanley (2021). Transparency 2021: Addressing Gaps in Equity Compensation (18)
Companies that are seeking to address issues of accessibility, professional advancement and opportunity for BIPOC employees may wish to consider the role of equity in the compensation gap. Research shows that equity compensation can make up 27% of an individual’s net worth, meaning that fostering a more inclusive equity strategy can ultimately drive greater financial advancement opportunities. 2
Want to learn more on this topic? Download our latest research study “Transparency 2021: Addressing Gaps in Equity Compensation” to learn more about the gaps and opportunities within equity compensation and how to address them.
1 McKinsey, Hunt, Prince, Layton (2015). Why Diversity Matters.
2 Barney, Lee, Plan Advisor, (2019). The Importance of Equity Compensation in a Retirement Portfolio