Financial Planning Adds Value to Employee Stock Awards

Equity grants appreciated more when seen as part of the compensation package

Stephen Miller, CEBS By Stephen Miller, CEBS March 29, 2021
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Financial Planning Adds Value to Employee Stock Awards

Among employers using company stock to attract and reward top talent, it's important to help employees make the most of stock awards by offering financial planning advice as well, new research shows.

Some workers aren't even accepting their awards, much less selling stock or exercising options at appropriate times to do so, according to Fidelity Investments, which manages employee retirement plans and stock award programs.

Recognizing Value

Fidelity received responses last year from 440 employees at publicly traded companies who had received stock awards within the last two years, including restricted stock units, restricted stock awards, stock options or company shares given as performance awards.

The report, Unlocking Success—For You and Your Employees (link will download a PDF), found that employees who consider equity compensation in their financial planning were:

  • Twice as likely to take proactive steps to manage their stock awards, such as accepting awards, exercising options or selling shares.
  • Twice as likely to work harder, knowing that the value of their stock plan award may increase as their company's stock price increases.
  • Three times as likely to feel loyalty to their employer.
  • Three times as likely to include the monetary value of stock plan benefits when calculating compensation from their employer.

Among employees that consider equity compensation in financial planning:

  • 61 percent highly value their company's equity compensation plan.
  • 55 percent considered the monetary value of stock plan benefits when calculating compensation from their employer.

"Organizations continue to offer company stock awards as a way to attract and retain top talent, as well as to reward top performers," said Mark Haggerty, head of stock plan services at Fidelity Investments. "However, including company stock in financial planning is key to unlocking the real value of these awards—not only will employees have a greater appreciation of their company stock plan, but they will understand how company stock awards can contribute to their overall financial well-being."

Delving deeper into the data, Fidelity found that when employees include company stock in their financial planning activities, they:

  • Are more likely to proactively manage their company stock awards. Of the employees who include company stock in their overall financial planning:
    • 72 percent accepted their awards versus 34 percent among employees who do not consider equity compensation in their financial planning.
    • 52 percent exercised options versus 39 percent. 
    • 57 percent sold shares versus 25 percent.
  • Have greater overall financial confidence. Of the employees who include company stock in their overall financial planning:
    • 59 percent feel more confident about their ability to make good decisions when it comes to their company's stock plan versus 34 percent of employees who do not include equity compensation in their financial planning. 

"Company stock awards can be a great way to motivate and reward employees, as long as employees understand the best way to manage their awards," Haggerty said. "Employees not only need to understand how their company stock plan works, but how their company stock awards work within their own personal financial picture."


Case in Point: 'Owning It' at Ally

Ally, an online banking and financial services firm headquartered in Detroit with nearly 10,000 employees, found that stock awards, an employee stock purchase plan and a financial well-being program work together to ensure employees have a vested interest in the firm's success.

"In 2019, Ally introduced our first #OwnIt grant to make all employees shareholders, and we did it again in 2020," said Kathie Patterson, Ally's chief HR officer. The #OwnIt awards are one-time, discretionary grants of 100 shares of Ally restricted stock units.

Ally had a record year across many metrics in 2020, the firm reported, and wanted to reward "the exceptional efforts of our team members across the organization." For many employees, the #OwnIt grant awards "may also have been their first opportunity to participate in the stock market," the firm said. Offering equity grants "was a big step, but an important one that underscores Ally's focus on creating an inclusive culture where all active, regular employees have a vested interest in our success."

Patterson added, "It's about living our values, leading with heart and humanity, and inspiring an inclusive culture where everyone has a seat at the ownership table. The passion, protection and empowerment that come with an ownership mentality are not only good for business—they're transformational for employees."

Ally also has an employee stock purchase program that gives staff the option to purchase Ally common stock at a 15 percent discount twice a year. And the firm expanded its resources for employees by launching a Financial Learning Center, which includes a financial well-being assessment; a variety of calculators, tools, and resources; and free, unlimited access to certified financial planners.

While most companies offer some form of equity at a leadership—or even a senior leadership—level, "we felt that the passion, protection and empowerment that comes with a founder's mentality is something all employees can benefit from," according to a statement by the firm. "We want working at Ally to be more than just a job—it's about having a responsibility to drive the company forward and fostering a connection to our future success, which benefits us all—customers, shareholders and, importantly, one another."



Related SHRM Articles:

Stock Plans Increase Savings, Attract Millennials, Studies Show, SHRM Online, October 2020

Equity Compensation Plans Build Loyalty but Uncertainty Abounds, SHRM Online, February 2018

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