Amid the “Great Resignation,” equity compensation has become more critical for public and private companies competing for talent across the globe, according to the latest proprietary research report from Morgan Stanley at Work.
To gain an edge, the report finds companies are rolling out creative solutions in their plan design to improve retention.
Morgan Stanley at Work’s new research report, The State of Equity Plan Management at Public and Private Companies, also noted that equity compensation is one piece of a larger puzzle when it comes to attracting, retaining and motivating talent, as employees are focused on their entire work experience.
“This report shows that even as the way we work continues to evolve, equity compensation is only increasing in importance as a key tool in attracting and retaining the best talent throughout an organization,” said Scott Whatley, Managing Director & Global Head of Equity Solutions, Morgan Stanley at Work.
“In 2022, companies can not only get a leg up in the war for talent by updating their equity compensation plans, but also significantly help employees reach their financial goals.”
Scott Whatley, Morgan Stanley at Work
Nearly one in three (32%) HR decision-makers indicated the No. 1 goal for offering equity compensation is to attract and retain talent—which the report said is especially timely as nearly half (47%) reported their workforce attrition in 2021 was higher than 2020.
While equity compensation is a key benefit for companies to attract and retain talent, just 35% of private companies cite providing this benefit to executives and all employees, vs. 43% of public companies.
“In 2022, companies can not only get a leg up in the war for talent by updating their equity compensation plans, but also significantly help employees reach their financial goals,” Whatley continued. “Equally important is for companies to find the right stock plan administrators to help scale these benefits so that all employees—from the junior ranks to the very top—can understand, engage with, and ultimately derive satisfaction from the equity.”
More key findings:
• “Greatness” remains elusive: The report highlights that 50% of equity leaders reported their current equity compensation plan is at least “good” at retaining talent, but only 38% indicated exceptional performance.
Of those that indicated their current equity compensation plan was not successful in talent acquisition or retention, 55% reported that employees are leaving for opportunities that offer stronger benefits or more work-life benefits, irrespective of equity offered.
• Plan design is evolving: Nearly 4 out of 10 of public companies (35%) are providing lookbacks and discounts for employee stock purchase programs. Almost a third of U.S. and Canadian companies (32%) are offering shorter and more flexible vesting schedules that cater to employees’ needs.
• Scale is critical: “Expand equity to a wider range of employees” is the second most popular strategy among HR decision-makers when it comes fighting attrition, after salary raises. Nearly one in three U.S. HR decision makers said they are looking to expand their equity compensation programs. The study found 48% of public companies are expanding their offerings to a wider range of employees, vs. 35% of private companies.
• Frequent communication=high engagement: Among employers with employees who are highly to moderately engaged with their stock plan, 48% are communicating to participants weekly to monthly. On the other end of the spectrum, among employers with low to no engagement, 70% are communicating annually or on an ad hoc basis.
The 2022 report was commissioned to benchmark company mindsets and behaviors surrounding equity plan management and better understand how organizations around the world are implementing and managing equity compensation plans. The research also provides insights into the current landscape and industry trends surrounding equity plan management, employee engagement, related priorities and challenges and the types of plans currently offered.
Insights include opinions from both public and private companies, whereas previous iterations focused only on the private market.
“As private companies are staying private longer, the need to effectively manage and update their equity plans to evolve along with participant needs has never been more critical,” said Jeremy Wright, Managing Director and Co-Head of Morgan Stanley at Work’s Global Private Markets. “Employees and job seekers have become savvier when it comes to equity compensation, giving private companies and founders a major opportunity to use their equity plans to attract like-minded leaders to help build their businesses.”
The full findings of Morgan Stanley at Work’s 2022 State of Equity Plan Management Report can be found here.
SEE ALSO:
• ESOP Advocate Touts Retirement Savings Advantages Revealed in New Study
• Employers, Employees Agree: Financial Benefits a Priority for 2022
• Employees Need Advice About Equity Compensation