In your role as a stock plan administrator, do you find yourself answering the same question over and over: what is an equity award? Although equity compensation has enjoyed growth in recent years, stock plan administrators often find themselves explaining the value of equity awards over and over to their employees (especially as changing market conditions impact the value of company stock).
Which is surprising in some ways, when you consider the value that these equity plans may offer. Employees have an ownership stake in the company, and may be more motivated to help the company succeed. However, if employees don’t understand what an equity award is, they could be missing out on this benefit.
Beyond the basic understanding of an equity award, you now have employees whose employment history differs from previous generations. Due to a number of factors, including the rapid expansion of the gig economy, employees are often spending less time with one specific employer. They may even leave for a year or two before returning, depending on their career and financial goals. The relationship between employer and employee has evolved – has your equity program done to same to accommodate for this shift?
Before determining if your equity award administration has evolved to meet the modern worker, focus in on your specific employee population:
- What is the profile of your employee base – how large is it, and how many different locations do you have?
- How do you find talent for open positions – do you promote from within or conduct a broader external search?
- What are your employee retention rates like – is attrition a frequent concern among top executives?
Thinking through your specific employee landscape can help you envision what it is your employees care about, and what your equity program might mean to them.
Once you’ve done that, think about what your current equity program is, and what it offers:
- Is it flexible for contractors and consultants who might not be working at a full-time status?
- What are your retirement eligibility provisions like?
- What is your award treatment when an employee decides to leave the company? What about when/if they return?
Identifying the items above can help you think about your equity awards in a new way, one that may be better suited towards the employment trends of 2020 and beyond. Don’t be afraid to be creative in your thinking around your equity plan, because the more you think about what your participants need and want, the more you might find yourself making positive changes to your equity plan.
Depending on the changes made, it might also help you with the broader question faced by employees: instead of asking ‘what is an equity award,’ they might start asking ‘what can my equity award do for me?’
At Shareworks by Morgan Stanley we are always helping our clients administer their innovative equity plans in Shareworks. To learn more about the Shareworks platform and what it can do for you, request a guided tour today.
About the AuthorMore Content by Sara Pinkus