Financial Decoder: Why Do Millennials Love Equity Compensation and How Can Entrepreneurs Use It?

Summary
Equity compensation is an increasingly common part of a benefits package. Why are younger workers driving demand for it? For entrepreneurs and small-business owners, what’s the best way to use equity compensation to attract and retain employees?

00:00 Opening
00:50 Equity compensation and potential biases
04:00 Entrepreneurs and how they use equity compensation
06:38 What might an employee consider if they're offered some form of equity compensation?
07:42 What are some ways small businesses can offer their employees equity or ownership?
09:15 How might compensation structure for millennials compare to prior generations?
13:17 Examples of creative equity offerings
14:52 Employee equity with a more mobile or more dispersed workforce
17:18 How can employers be proactive with equity compensation offerings?
19:02 Rules and regulations; 10b5-1 plans
20:10 How do SPACs and other innovative ways of going public affect equity compensation?
24:00 Recap and advice
26:20 After you listen


After you listen
• Learn more about including equity compensation in your financial plan.
• Listen to Amy Reback’s podcast, Equity Unpacked.
• Follow Mark Riepe on Twitter: @MarkRiepe.


Show Notes
As many small and early-stage businesses are still coping with the effects of the pandemic, one way to attract high-quality employees and help keep payrolls manageable could be the use of equity compensation. Increasingly, millennials are demanding that new job offers include equity as part of any compensation package. What’s behind this trend? When does it make sense?

In this episode, Mark talks with Amy Reback, head of Stock Plan Services at Schwab. They discuss what to look for in an equity compensation package, how employers can offer ownership in creative ways, and what changes to the regulatory landscape might affect equity compensation.

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Fortune, The Great Resignation
https://fortune.com/2022/01/04/great-resignation-record-quit-rate-4-5-million/
Leonhardt, Megan, “The Great Resignation rages on as a record 4.5 million Americans quit,” Fortune.com, January 4, 2022

2 https://www.starbucks.com/careers/working-at-starbucks/education/

3 https://jobs.netflix.com/culture

4 https://www.benjerry.com/flavors/3-pints-a-day

5 Patagonia: Yvon Chouinard, How I Built This with Guy Raz, NPR, December 25, 2017
https://www.npr.org/2018/02/06/572558864/patagonia-yvon-chouinard

6 Paljug, Katharine, “16 Cool Job Perks That Keep Employees Happy,” businessnewsdaily.com, December 21, 2021
https://www.businessnewsdaily.com/5134-cool-job-benefits.html

7 https://candor.co/articles/tech-careers/perks-of-working-for-google-a-playground-for-grownups

8 https://careers.google.com/benefits/

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Supporting documentation for any claims or statistical information is available upon request.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Investing involves risk including loss of principal.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Tax laws are subject to change, either prospectively or retroactively. Individuals should contact their own professional tax advisors or other professionals to help answer questions about specific situations or needs prior to taking any action based upon this information.

Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

Schwab Stock Plan Services provides equity compensation plan services and other financial services to corporations and employees through Charles Schwab & Co., Inc. (“Schwab”). Schwab, a registered broker‐ dealer, offers brokerage and custody services to its customers.

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