How to Increase Participation in a Private Company Equity Plan

August 3, 2020 Shareworks Marketing

Consider this scenario: your employer offers a 401k retirement program with a contribution match (also known as free money), but your employees decide it’s too complicated to take advantage of the program – so the program essentially goes to waste.

Although it sounds crazy, it’s a scenario that’s familiar to most stock plan administrators. Just like a 401k plan, your stock option plan is a company benefit and employees who don’t participate are essentially throwing away part of their compensation. It just makes no sense.

That’s why it can be so frustrating to know that your participants, aren’t participating. But help is at hand! As part of our annual Stocktoberfest, we’re going to explain how you can boost equity participation by tackling the problems holding your stock option plan back.

Why is your equity participation plan lagging? 

While the use of stock options in a compensation plan is common, understanding stock option compensation can be complicated and the learning curve may be steep. Oftentimes, talk of RSUs and NSOs may intimidate participants, making them less engaged and more likely to exercise their options at the last minute.

Another common obstacle to equity participation is a misperception about what compensation is. When employees don’t see their stock options as compensation, they’re not incentivized to participate in the plan. The upshot? Your stock option holders zoom past the culture of ownership exit on the highway of their careers, never building the momentum those options were meant to create.

To change what compensation looks like, your participants need:

  • A view into the dollar-amount value of their holdings
  • A better understanding of how taxes affect their equity compensation
  • An avenue toward liquidity
  • Acknowledgment that they’re leaving part of their compensation on the table

How can you increase participation in your equity plan?

It starts with education. Problems can stem from misconceptions, so the more clarity you can bring to your equity participants, the more likely they are to engage. Here are a few Stocktoberfest tools you can use to help your option holders better understand their equity compensation:

After educating participants, it’s time to empower them to take ownership of their equity package by giving them access to their holdings, a dollar-amount view of their shares, insight into their vesting schedule and a technology-driven path to exercise their options. The

Shareworks Participant Experience helps with that by enabling your equity participants to:

  • Accept grants electronically
  • View their holdings and vesting schedules
  • See the appreciation of their stock option value in dollars
  • Access equity anywhere with our mobile app
  • Receive advance notifications that encourage them to exercise before the last minute
  • Transition more easily with termination forecast statements
A view of Shareworks Participant Experience

With our equity plan management solutions, participants see the real value of their equity grants.

A view of Shareworks Participant Experience Exercise

They can also easily convert options to shares with in-app exercise.

You can even strategically incorporate your 409A valuations to motivate participant engagement. When participants see your company value going up, they’re more likely to understand the importance of their stock option compensation and more motivated to play a part in generating continued growth.

What can you do today?

As a stock plan administrator, you want to see your plan succeed. This isn’t a “take it or leave it” situation; you’re invested in the success of your employees and equity plan participants. So what can you do right now to improve the performance of your stock option plan?

Here are three things:

  1. Share the excitement and build a culture of ownership at your company by hosting your own fireside chat to talk about equity.
  2. Post your most recent 409A valuation to build momentum and motivation among equity holders and grant holders alike.
  3. Get your HR team involved. Equity is not only a motivational tool. It’s a retention and recruitment tool, and our compensation solutions help you stay competitive. Learn more here. 

When employee equity goes unused, it’s not just a waste for them, but a waste for the company too. Learn more about how to manage a successful equity compensation plan with Shareworks Academy.

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