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How Much Do Employees Value Their Equity Compensation?

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July 30, 2020 | Jennifer Namazi

How Much Do Employees Value Their Equity Compensation?


A study by UBS (UBS Participant Voice: Unlocking Value) finds that participants who receive more education, advice, and personalized service place more value on their equity compensation. Additionally, employees who rate their company culture highly also place more value on their equity awards.

A second, follow up study conducted by UBS in May (UBS Participant Voice: Critical Advice) examines participant behaviors and attitudes in the wake of the COVID-19 pandemic. Both studies provide insights into how participants view, value, and interact with their equity awards, and make a strong case for a continual need to inform, educate and guide stock plan participants.

The first study was conducted in the fall of 2019 as an edition of UBS Participant Voice, an online industry-wide survey of 1,046 US based equity plan participants with over $5,000 in investable assets. Study respondents work in a variety of industries and company sizes, with headcounts ranging from fewer than 500 employees to over 50,000. UBS Participant Voice has been studying participant perceptions since 2013.


Perceived value of equity awards is increasing, yet not all employees place high value on awards

From the inaugural study to 2019, the number of participants who highly value their awards has steadily increased. In the recent edition, 42% of respondents reported that they highly value their equity awards, compared to just 26% in 2013.

On the flip side of high value, one in three employees (36%) still see minimal value in their awards. While this figure is a decrease from prior versions of the study, it is significant – representing a population who may potentially shift their perception higher if companies take the proactive steps that are associated with increasing perceived value.


Employees don’t value what they do not understand

The study found that employees who are more satisfied with the education they receive about their equity awards tend to value them more.  Yet, employees are not always aware of the information, education, or advice available to them. Less than half of the surveyed employees report receiving education (46%) or advice (41%) on their equity compensation.

Eighty percent (80%) of participants who receive personalized advice say they feel good about their financial situation, compared to 58% of those who did not receive such advice. The employees who received advice expressed higher confidence in their awards decisions, in retiring when and how they’d like, and in achieving their financial goals.

These figures suggest that companies should put greater effort towards efforts and resources aimed at helping employees understand the organization’s equity compensation programs, including their individual awards.


Employees want straightforward, easy access to plan information

Most participants rate their level of understanding the plan as “partly” or “not well at all.” The features they report desiring most in an equity plan are:

 

  • Online access to education and tools (74%)
  • Working with a financial advisor (68%)
  • Access to self-paced online training (60%) 


The stronger the company culture, the higher the perceived value of equity awards

UBS reports that “employees who rate their company culture highly find more value in their equity awards.” Almost three-quarters (71%) of employees rate their company’s culture favorably. This is an uptick from 2013, where only 61% gave such a rating. Overall, 89% of respondents said culture is important in choosing a job.

While more companies appear to generally recognize the benefits of creating a favorable internal culture, it’s important to understand that culture is what drives many of the employee attitudes and behaviors – ranging from loyalty to value placed on the suite of benefits. Efforts to improve culture will likely have a positive trickle-down effect on the perceptions of equity compensation.


Gender and age play a role in equity award value –  guidance and education can bridge the gaps

The survey found that half (50%) of younger employees (ages 18-34) place only minimal value on their equity awards. Yet, this age category reported the highest numbers compared to other age groups in wanting to do more to manage their finances better (71%) and being willing to pay for advice (73%). Contributing factors to these attitudes include more mobility in their careers, lack of understanding about awards, and more eagerness to sell upon vest than other age groups.

Women overall are less likely to value their equity awards than men, with 41% assigning minimal value to them (compared to 34% of men) and 38% reporting a high perceived value (versus 45% of men). They also are less likely to see equity awards as a path to wealth and expressed more confidence about their equity awards when working with an advisor (63% when working with, versus 35% felt confidence without).

Additionally, women overall were less satisfied with communication and education offered than their male counterparts.

More than half of participants have sold company stock because of COVID-19 related market volatility. Men (57%), younger employees (63% of 18-34 year olds and 62% of 35-50 year olds, compared to just 33% of 51+ aged employees) and wealthier employees with $1m+ in assets (67%) are more likely to sell their company stock.  Those same categories of participants are those who also more likely to regret their decisions to sell.  

Younger employees and women report willingness to seek advice. In addition, the findings of regret amongst men, younger employees, and wealthier participants suggests there is significant opportunity for employers to step up their educational efforts and provide access to resources that can provide guidance.


Impact of crisis on perceived value of equity awards

As COVID-19 creates uncertainty in the financial markets, UBS pursued a follow up study, UBS Participant Voice: Critical Advice, to determine how participant perception of value changes in times of crisis. UBS surveyed 319 plan participants in May to understand the impact of COVID-19 on their view of equity awards. 

The follow-on study finds that while perception of equity award value has seen a minor decline during the pandemic (34% of participants assign a high value to their equity awards after the onset of COVID-19, compared to 42% before), long-term optimism remains strong. Three-quarters of respondents report feeling optimistic about the future of both their company (75%) and their industry (75%).

Participants say that in times of crisis they need communication and more guidance. Ninety-three percent (93%) say that communication is very effective at helping them understand how COVID-19 impacts equity compensation. Eighty-six percent (86%) desire more guidance. This is true regardless of age, gender, or assets.  

Plan sponsors should note the impact uncertainty can have on perceived value and take steps to ensure consistent, proactive, and well-planned communication is a priority. In addition, employers can assess which additional resources can provide the increased guidance that employees seek.


Education, communication, and professional advice do drive perceived value of equity awards

Companies expend a multitude of resources in designing, implementing, and maintaining their equity plans. It is critical to understand how these efforts translate to the value employees attribute to their awards. The findings in UBS’ participant studies provide important insights into participant attitudes along with a roadmap of actions companies can take to increase perceived value.

View the full reports for UBS’s participant studies.

 

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