How to make your hard work literally pay off

April 20, 2022 • Issue #140

Hi y’all —

I’m on vacation emotionally recovering from Harry Styles’ Coachella set attending my little brother’s wedding in North Carolina, so I’m writing this issue in advance. In fact, me and my giant iced coffee are frantically trying to complete a whole bunch of tasks on my to-do list, including but not limited to “find Spanx” and “put up out-of-office reply.”

This will be maybe the longest vacation I’ve taken the entire time I’ve worked at Money. The bulk of my paid time off gets reserved for traveling back and forth to Florida for the holidays, and I’m always always afraid to use the rest of my PTO in case something comes up and I need it.

(Yes, I did take a day off last year for a Jonas Brothers concert. That’s exactly what I’m talking about.)

I’m not the only one who has PTO on the brain. The Great Resignation has put a renewed focus on benefits as companies scramble to fill job openings. In some places, this has taken the form of unusual work perks like private chefs and “pawternity” leave. In others, companies are raising salaries or offering their employees non-cash compensation like equity.

What is equity, anyway? Should I seek to get it as part of my compensation package?

I called Jane Alexander, the chief marketing officer for equity management platform Carta, to nail down the basics. Alexander told me that equity compensation is basically “an ownership stake that allows [workers] to be financially tied to the outcomes of that company.”

Employers like the concept because it gives employees skin in the game. Linking a person’s work to the company’s success can incentivize them to work harder and stick around longer.

“You often will hear companies say things like, ‘I want people to act like an owner.’ Well, the best way to get someone to act like an owner is to make them one,” Alexander adds.

There are some pretty compelling stats around it. A recent Morgan Stanley at Work report found that 93% of HR professionals and 75% of workers said equity compensation and stock ownership are “the most effective way to motivate employees.” In addition to the idea that their labor can literally pay off, workers said they liked that it provided another (potential) source of income.

People talk about stock option golden handcuffs, but really I'm stuck here because it would be too painful to re-import all these custom emoji at another company.

Alexander says there are different types of equity, and which a company offers often depends on which stage of development it’s in and who the employee in question is.

The four main forms include:

incentive stock options, or ISOs, which give me the chance to buy shares of my company’s stock at a specific price — and maybe get a tax break on it
non-qualified stock options, or NSOs, which work similar to ISOs but don’t have a tax break for employees
restricted stock awards, or RSAs, which grant me shares of a company’s stock — and voting rights — right away
restricted stock units, or RSUs, which work similar to RSAs but only become available to me after a certain vesting period

I’m super simplifying this, but the main benefit of having restricted stock over stock options is that I usually don’t have to buy them. One of the biggest mistakes Alexander says employees make is they don’t take action in time to exercise their options. Some $580 million in equity expired without being exercised last year, she says, meaning it went back to the company instead of into workers’ pockets.

Stock options will also almost always retain some value. Once my RSUs have fully vested, I can sell them and get cash (though I obviously I have to pay taxes).

Kate Winget, head of corporate and participant engagement for Morgan Stanley at Work, says vesting periods have been getting shorter lately. She’s seen other trends in the space, as well, like the fact that more lower-level workers are receiving equity as opposed to it being reserved solely for the C-suite.

It’s not just for startups anymore, either, so Winget recommends making it part of my next job search regardless of industry. Alexander suggests also looking at whether a company is private or public and, if the former, investigating what the liquidity horizon is.

Equity isn’t right for everyone, but it can’t hurt to consider whether it could help me financially.

“Ask those recruiters or companies, ‘What is your equity compensation package?’ or ‘What would I be eligible for?’” Winget says.

THE BOTTOM LINE

(but please don't tell me you scrolled past all of my hard work)

Equity compensation is a way for employers to attract workers and give them a stake in a company’s success. But it can be complex, so I need to be careful to know the details and time requirements associated with each type of equity.

Generally, though, it’s a compensation trend that’s growing in popularity. Even Beyoncé knows its value.

“It is an innovative way that employers are engaging with employees, showing them the investment they're making in them,” Winget says. “From the employees’ perspective, they can recognize, ‘Ah, my time here is going to be rewarded.’”

VIA GIPHY

RECEIPT OF THE WEEK

check out this wild celebrity purchase

VIA INSTAGRAM

Actress Ashley Tisdale was excited to show off her newly decorated home recently in a video for Architectural Digest. Only one problem: She didn’t have any books on her bookshelves. To remedy that, Tisdale confessed she made her husband go out and buy 400 books on short notice. That’s downright Fabulous, if you ask me.

INTERNET GOLD

five things I'm loving online right now

1	Considering a career change? A British research base is looking to hire people to work at the world’s most remote post office — in Antarctica. There’s no running water, but the office is surrounded by penguins, so…
2	Sure, Bob Dylan can sing and play guitar, but did you know he’s also a painter? “His brushstrokes are like his voice: straightforward, rough, occasionally fragile,” according to one website that sells prints of the musician’s artwork. “He's not after artistic perfection but something larger, a moment, a feeling.”
3	Channing Tatum loves meerkats, and I love Channing Tatum’s love of meerkats.
4	I can’t stop watching Molly Burke’s YouTube videos after reading this amazing feature on blind women who love to wear makeup. “There is so much more to fashion and beauty than just looking in the mirror,” she told the Wall Street Journal. “[Makeup is] about self expression, it’s about self-care, it’s about taking that 10 minutes in the morning to do something for me that feels good.”
5	McSweeney’s envisioned what famous authors would be like on rollercoasters, and it’s hilariously accurate.

401(K)9 CONTRIBUTION

send me cute pictures of your pets, please

VIA KRISTIN KELLY

Meet Gidget, a perfect pup who is not above begging for equity.

Quick programming note: Dollar Scholar will be taking a short break next week due to the second Harrychella set all my travel. I’ll catch you in May.

Julia

P.S. I might be off, but you can still send me hollas! Do you have experience with equity compensation? Have you ever seen a penguin? What’s your favorite Channing Tatum role? Talk to me at julia.glum@money.com or @SuperJulia.

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