What is equity compensation, and why do companies offer it to employees?

Equity compensation is a form of non-cash payment to employees that provides them with ownership stakes in the company, typically through stock options or shares. Companies offer equity compensation to motivate employees, align their interests with company performance, and encourage long-term retention.

Who is eligible for equity compensation, and which types of companies commonly offer it?

Equity compensation is commonly offered to employees at startups, publicly traded companies, and sometimes private companies experiencing growth. Eligibility can vary but often includes employees, executives, and key team members.

What are the different types of equity compensation offered to employees?

Common types of equity compensation include:

• Common stock: Provides ownership rights and voting privileges.
• Preferred stock: Offers certain privileges, such as priority in dividends.
• Restricted stock: Comes with restrictions or vesting requirements.
• Stock options: Grant the right to buy shares at a predetermined price.

How does the value of equity compensation change over time?

The value of equity compensation generally increases as the company's value and stock price rise. Employees benefit from this appreciation.

Why is managing global equity compensation challenging, and how can companies address these challenges?

Managing global equity compensation is complex due to differences in tax regulations across countries. To address these challenges, companies should partner with global payment distribution platforms with expertise in local tax laws and experience in designing and managing global equity plans. This ensures compliance, minimizes errors, and maximizes the value of equity compensation for all employees worldwide.