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Who Should Participate Which employees will receive equity? A generation ago, equity compensation, if offered at all, was generally limited to a company's senior executive ranks. Today, many forward-looking companies in a wide range of industries issue stock or stock options to all employees. At many of these companies, the equity program is not simply compensation, but one of the lynchpins of an organizational culture in which everyone in the firm feels invested, both financially and psychologically, in the company and its fortunes.
It is important to remember that the performance-boosting effects of equity compensation stem largely from employees' sense of belonging to a team with a common goal and shared successes. In turn, team performance is greatly strengthened by open communication among the team members about those goals. When some people in the company have equity but others don't, it is more difficult to have open conversations about the growing value of the equity that pull people together and generate group energy. That's why many companies grant at least a little equity to all personnel, even those not traditionally seen as key players.
Nevertheless, management also needs to strike a balance between all employees being focused on the common goal and the effect of broad-based participation on the dilution of the company's ownership and the future value of the stock. In addition, while sharing equity with all employees may be important in creating a desirable culture in the organization, it is equally important to ensure that enough stock is allocated to employees to be meaningful and to target ownership to employees who merit the award based on their contribution to the company.
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