The multiplier effect
Doubling how much participants appreciate equity awards
Companies offer equity awards to attract and reward top talent, but participants don’t always recognize the value. We discovered that when participants follow these three steps, they appreciate their awards twice as much:
Step 1: Incorporate equity awards into the broader financial picture. Participants value awards 13% more when they consider equity awards within the context of a financial plan.
Step 2: Seek advice on company stock holdings. When participants regularly discuss equity awards with a Financial Advisor, appreciation rises by 16%.
Step 3: Diversify company stock holdings. Participants who diversify their holdings value equity awards 16% more than those who sell all their vested shares.
While any one step helps boost appreciation, taking all three steps doubles the value participants place on their awards.
The UBS Equity Award Value Index
A groundbreaking tool for measuring if participants value equity awards.
We set out to discover how participants from a cross-section of companies, industries and service providers feel about their equity awards. We learned that certain variables drive their perception. The resulting UBS Equity Award Value Index can help measure how your participants are feeling about your plan.
Vesting experience clearly matters.
- > 6 vestings. Participants view equity awards as one way to build wealth. They understand the potential of their awards.
- 3-5 vestings. Participants view equity awards as a paycheck supplement. They aren’t sure how to maximize the potential of awards.
- < 3 vestings. Participants view equity awards as a lottery ticket. They don’t perceive their equity awards as having long-term value.
“Show me the value”
Three steps to help employees get the most from your equity plan.
Some companies may not realize that the financial crisis has made investors skeptical of the markets. As a result, participants don’t always see the full value of equity plans. In fact, only two out of five place considerable value on equity awards.
We examined a cross-section of companies to discover the factors that can help companies increase the value participants place on awards. Here are three critical steps that can help:
- Drive a strong culture that reinforces the company’s growth potential
- Be sure your plan is straightforward so it’s easy for employees to participate
- Deliver education and personalized advice that helps participants see equity awards as part of their broader financial picture