Explaining Equity in Offer Letters Clearly

Equity in Offer Letters: Units, Value, and the Transparency Tradeoff

Few parts of the hiring process generate as much head scratching as the equity section of a job offer. Salary and bonus are easy enough to understand. Benefits can be compared side by side. But when it comes to stock options or RSUs, the conversation often grinds to a halt.

Candidates ask: “How many shares is that worth?”
Recruiters reply: “Well, it depends…”

And so begins the delicate balancing act of trying to explain ownership in a way that feels both compelling and accurate.

The challenge is simple on the surface: Should  you tell candidates the number of units, the dollar value, or both? The reality, of course, is more complicated.

For private companies, the decision isn’t just about filling in numbers on an offer letter. It’s about risk, perception, transparency, and ultimately whether candidates see equity as a valuable part of their compensation — or as a confusing afterthought.

Framing the Size of a Grant

Before deciding whether to show units or value, companies must first choose how to frame the size of the grant. There are three main ways:

1. Percentage of Company
• Useful for early hires or senior executives who think in terms of ownership and company growth.
• ⚠️ Caution: Avoid anchoring most employees to a fixed ownership percentage — dilution over time will quickly change that number and can lead to confusion or disappointment.
2. Number of Shares (Units)
• The most common and administratively consistent approach.
• Works well because it aligns with how grants are actually managed internally.
• Provides a concrete number that can later be tied to value as the company matures.
3. Monetary Value
• Helps candidates understand what the shares are worth today and can make equity feel more tangible.
• Useful for discussing potential upside if the company grows or exits — but should always be paired with realistic expectations and disclaimers.

Each framing method has a place, depending on company stage, audience, and recruiting philosophy. But for private companies, where valuations change and data is sensitive, leading with units tends to be the most practical and sustainable choice.

Units vs. Value: The Core Debate

When a company extends an equity grant, it’s usually defined internally in units (options, RSUs, etc.). The question is: how do you communicate that in a way candidates actually understand?

Three approaches dominate:

• Units only
• Value only
• Units + illustrative value

Each has different implications for compliance, candidate experience, and recruiting effectiveness.

Units Only

Many private companies stick to units in offer letters.

Why

• Keeps the document clean.
• Matches how grants are administered internally.
• Avoids “promising” a value that can change.
• Eliminates administrative complexity — since fair market value (FMV) fluctuates over time, granting a fixed dollar value would require constant recalculation of equivalent units as the price changes.

Upside
• Legally safe.
• Protects sensitive valuation info.
• Simplifies administration — no need to track conversions when FMV updates.

Downside
• Units can feel abstract or “empty.”
• Candidates can’t easily compare to other offers.
• Leaves recruiters to explain, often inconsistently.

For private companies, this approach often strikes the most practical balance. Because FMV is expected to increase over time, granting dollars rather than units would be an administrative nightmare. Every time FMV shifts, the number of shares tied to a fixed dollar value would have to be recalculated, complicating both offer management and recordkeeping.

Value Only

Some companies lead with a target dollar value, then calculate the unit count behind the scenes.

Why
• Easier comparison to salary and cash offers.
• Reinforces equity’s place in total rewards.
• Cleaner for recruiters to explain.

Upside
• Feels tangible.
• Anchors the candidate on a number.
• Strengthens competitive positioning.

Downside
• Creates risk if the share price moves.
• Forces you to pick a valuation methodology (409A, last round, rolling average).
• Requires disclaimers to avoid misrepresentation.

Hybrid: Units + Value

The most candidate-friendly approach combines both: show the unit count in the letter, but pair it with an illustrative value or scenario model.

Why
• Provides context without locking into a promise.
• Balances compliance with clarity.
• Builds trust.

Upside
• Transparency boosts credibility.
• Candidates see both “what” they’re granted and “why” it matters.
• Helps recruiters explain upside.

Downside
• Requires training, consistency, and disclaimers.
• More work to keep supplemental materials current.

Valuation Methodologies: The Hidden Minefield

If you show value, you must pick a methodology. That’s where things get tricky.

• 409A valuation: The safe choice. But updates only periodically, so it may feel outdated.
• Last preferred round price: Market-based and aspirational, but not always realistic.
• Rolling averages: Smooth volatility but can obscure transparency.

The real risk lies in inconsistency.  Changing your methodology midstream can damage credibility. Candidates don’t care which approach you pick as much as they care that it’s clear and consistent.

Transparency and NDAs

Some private companies only disclose value after candidates sign an NDA. That can protect sensitive data, but it also slows down recruiting.

If you guard equity details too tightly, you may protect information at the cost of momentum. Remember: your competitors are out there selling ownership as a story. Don’t make candidates work harder than necessary to believe in yours.

Why Candidate Experience Matters

Equity should be inspiring. But for many candidates, it’s intimidating. Units without context look meaningless. Values without explanation look arbitrary. Either way, equity gets discounted instead of valued.

And that costs companies in three ways:

1. Lost hires: Top candidates take clearer offers from competitors.
2. Undervalued equity: Employees mentally discount their package and focus on cash.
3. Retention risk: If employees never understood equity, they’re less motivated to stay for the long term.

If your candidates walk away confused, you haven’t just failed to educate — you’ve failed to sell one of your company’s most powerful benefits.

How you introduce equity at the offer stage sets the tone for the entire relationship. If it’s handled poorly, candidates leave confused or doubtful. If it’s handled well, it builds trust from day one and reinforces the idea that joining the company means becoming an owner.

Best Practices: Do’s and Don’ts

✅ Do
• Pick a methodology and stick to it.
• Train recruiters and managers consistently.
• Use visuals and simple scenarios.
• Include clear disclaimers — not buried in legalese.
• Treat the offer letter as the first step in equity education.

❌ Don’t
• Provide a value with no context.
• Switch valuation methods midstream.
• Assume candidates “get it.”
• Let equity become an afterthought in the offer package.

Conclusion: Lead With Transparency

At the end of the day, candidates don’t remember the number of units — they remember whether the offer made sense.

For private companies, granting units instead of dollar values isn’t about hiding information ; it’s about being accurate. Value changes, markets move, and tying offers to a fixed dollar amount turns equity into a moving target. What matters more is giving candidates enough context to understand what those units represent — how they grow, how they create value, and how they connect to the company’s success.

Clarity builds confidence. When candidates understand how equity works, they’re more likely to value it, ask better questions, and see it as a meaningful part of their compensation — not an afterthought.

The takeaway: lead with transparency, stay consistent, and equip your recruiters to tell the equity story the right way. When you do, equity becomes what it was meant to be — a clear, credible, and compelling reason to join.

 For more resources for private companies, check out the Private Company Stock Plans section on NASPP.com