Stock plan benefits can be a powerful tool for employers looking for a competitive advantage, yet many employees remain unaware of how to make the most of the benefit.
According to findings from Morgan Stanley at Work’s annual Stock Plan Participant Survey, 58% of participants view equity compensation as a reason they have stayed with their current employer. Furthermore, 41% say their equity awards are a reason they joined their current employer.
Yet most participants are not very confident in how to maximize the financial benefit of their equity awards. Only 33% of participants are “very or extremely” confident they know how to maximize the financial benefit of stock plan benefits. And while most stock plan respondents (75%) feel confident in their ability to access their stock plan account, only 52% understand how to sell their stock plan shares.
The tax implications also continue to confound participants. In fact, two-thirds are not confident that they understand how taxes may affect their stock plan benefits.
Few participants also seem to be choosing to keep the equity “as is.” Once shares were sold or options exercised, a small number of respondents chose to reinvest their proceeds, and instead, opted to spend or use the proceeds as cash. Here, Morgan Stanley found that nearly one out of three deposited the proceeds into a checking or savings account. Only 17% used the proceeds to invest in the market through a brokerage account, and only two out of five participants have not sold their vested shares.
The survey, which builds off the organization’s recent State of the Workplace Financial Benefits Report, explores the benefits of stock plans, how participants leverage their plans and how they can improve employee retention.
As to employee perceptions of the benefit, employees apparently are divided over what makes equity compensation a strong motivator. According to the findings, the top three reasons participants appreciate equity are that it:
- gives them a stake in the success of the company (27%);
- helps meet long-term goals (26%); and
- provides an additional source of income (23%).
In addition, slightly more participants view equity compensation as “extra pay I don’t count on” (44%) than believe it is “a core part of my compensation, like my salary” (39%). Still, participant perception of stock plans is positive. Here, 69% agree that stock plan benefits are a way for their company to recognize their contributions.
“The research underlines the important role equity compensation continues to play when it comes to recruiting and retaining top talent,” says Kate Winget, Managing Director and Head of Corporate and Participant Engagement for Morgan Stanley at Work. “That said, while equity compensation is clearly a powerful motivator, there is more work to do to ensure participants have the knowledge and resources they need to make the most out of this benefit,” she adds.
Participants apparently are eager to learn more about their stock plan benefits, however. Nearly two in three respondents said they are interested in attending an education session on topics related to equity, retirement and investing.
Data from the survey comes from an in-house survey of 40,000 U.S. domestic stock plan participants conducted during September and October 2021.
