Why Equity Compensation is So Valued, Ep 47
In this week's episode, I want to cover why equity compensation is so valued by employees. Although we're staying general, I'll still be touching on some specific reasons. If you've listened to previous episodes, you know I like to give a little background info? Well, this will be no different. I will do my best to keep it short and sweet. Remember, when I'm talking about equity compensation, I'm referring to company stock that is awarded and or made available to you through your employer. I focus on publicly traded companies but this can also apply to privately held companies as well. Your equity compensation positions may be acquired through employee stock purchase plans, restricted stock units, restricted stock awards (aka restricted stock), and last but not least non-qualified stock options. To keep it simple I'm just lumping them all together as equity compensation. With that background, let's get to it.
You will want to hear this episode if you are interested in...
- Top 3 reasons employees value equity compensation according to a 2017 study [1:47]
- Changes in what people are doing with equity compensation [4:53]
- How equity compensation is used for bringing on and keeping talent [6:20]
- What do 85% of people want more of in regards to equity compensation? [8:09]
- This week’s FLASHBACK [09:54]
Top 3 reasons employees value this form of compensation
Employees said that having access to equity compensation was an essential or very important benefit. The first and highest rated reason equity compensation is valued is because it helps employees build wealth. Makes total sense. Specifically, the study results said, "to significantly build wealth". This came in at 55% and honestly, I'm surprised the number is not higher.
Reason number two is that it allows them to participate in the company's growth. It came in not far behind number one at 52%. Now I'm assuming growth means the growth of the stock. We all know a company can grow in revenue, but its stock may not move in the same direction.
The third and final reason to value equity compensation is greater control. This answer came in the 40% range. Respondents said it gives them greater control over both personal finances and also their financial decisions and rewards. I guess you say this makes them more involved in their personal finances.
Give the people what they want!
We know employees value equity compensation and seek it out as they are deciding where to work. But employers should know that 85% of employees want their employer to provide more education related to equity compensation. Almost 9 out of every 10 participants in the study think their employers should provide more education. This is eye-opening and at the same time, as someone who caters to the world of equity compensation, it's not surprising at all.
Sure, there are a lot of resources available to employees but many employees think the existing educational resources are not adequate. Maybe this is a case of what the employer thinks is the solution is not lining up with what the end-user wants. I'm not sure how to resolve this difference besides continuing to create this podcast. So give the people what they are asking for and share these episodes. Help me, help them!
This week’s FLASHBACK: Weird interview questions
I recently came across an article with some cognitive testing questions. Things like if a bat and a ball cost $1.10 and the bat is a dollar more than the ball how much is the ball? One interview I thought of was an interview I did where I don’t think I was asked a single question. The guy went on talking about himself for a full hour. I just sat and listened and never interrupted. I got the job so I wondered if that was the point. I’ll never know.
The other interview I recalled was one where I was asked the weirdest question. The question itself was what is the 13th letter of the alphabet? After the interview, I asked the purpose of the question. I was told it was the test to see if I would guess, take a moment to think about the answer, maybe count it out on my fingers, tell them I would get back to them, or if I just happen to know the answer. The answer to the question is M in case you're wondering and I knew the answer immediately. They asked me at the end how I knew the answer so quickly. It was because I had a file cabinet with two drawers. I knew M was the answer simply because it was the last set of files I had in the first drawer. Had they asked for the 12th letter I would have been stumped.
Resources & People Mentioned