Equity Compensation Key Driver of Employee Retention and Engagement, Study Finds

Rhea-AI Summary

Morgan Stanley at Work has released its fourth annual State of the Workplace Financial Benefits Study, highlighting the increasing popularity of equity compensation. The study reveals that 76% of HR leaders report their companies offer equity compensation, up 4% from last year, and 12% from 2021. Equity compensation is seen as a key driver for employee engagement and retention, with 95% of HR leaders and 80% of employees affirming its effectiveness. However, gaps in equity education persist, with only 38% of employees aware of their company's equity benefits. Private company employees and HR leaders emphasize the importance of liquidity events, with 62% of employees and 86% of HR leaders considering them very important. The study also notes a decline in employees viewing equity compensation as a long-term investment, down 6% from last year.

Positive

• 76% of HR leaders report their companies offer equity compensation, showing a growth trend.
• 95% of HR leaders consider equity compensation as the most effective way to engage and retain employees.
• 80% of employees agree that equity compensation motivates and engages them.
• 62% of private company employees find the prospect of future liquidity events or IPOs important.
• 86% of HR leaders consider liquidity events important within the next 12-24 months.

Negative

• Only 38% of employees are aware that their company offers equity compensation benefits.
• Less than half of both employees (45%) and HR leaders find the company's participant education programs very effective.
• Employees’ perception of equity compensation as a long-term investment has decreased by 6% from last year.

• Equity compensation gaining in popularity as more companies offer stock plan benefits
• Employees and HR leaders see equity compensation differently
• Despite progress, gaps remain in equity education and awareness

NEW YORK--(BUSINESS WIRE)-- Morgan Stanley at Work today issued results from its fourth annual State of the Workplace Financial Benefits Study, showing that equity compensation continues to grow in demand among both employees and HR leaders alike, and at both public and private companies. While employers cite equity as the top driver of employee engagement and retention, opportunities remain to help employees better understand the financial opportunities available to them through equity ownership.

Key findings from the study include:

• Equity compensation is growing in popularity across the board: More HR leaders report that their companies (76%) are offering some form of equity compensation benefits—up four percentage points year-over-year and a 12-point increase since 2021 (65%).
• Equity compensation retains MVP status for driving employee engagement: Nearly all (95%) HR leaders say equity compensation is the most effective way to keep employees motivated and engaged, which has remained virtually unchanged year over year (97% in 2023, 95% in 2022, and 93% in 2021)—and four in five employees agree (80%).
• Liquidity is a laser focus at private companies: Over three in five employees at private companies (62%) say the prospect of a future liquidity event or IPO is very or somewhat important to them. Liquidity events are even more top-of-mind for HR leaders, with 86% saying it’s important to consider a liquidity event (such as a tender offer) in the coming 12-24 months—and even more (88%) for an IPO.
• Employers more likely than employees to see long term value in equity compensation: Employees’ perception of equity compensation as a long-term investment vehicle diminished over the past year (down six percentage points from 2023), highlighting the challenge in front of HR leaders—who more firmly believe in the merits of equity compensation for meeting long-term investing goals such as retirement. This suggests more can be done to help employees understand and integrate their equity compensation into a comprehensive financial approach.
• And awareness and education gaps persist: Despite the growing demand and popularity of equity compensation, only 38% of employees say they are aware that their company offers these benefits, and less than half (45%) of both employees and HR leaders said their company’s participant education program is very effective—indicating important opportunities for improvement.

“The data shows that equity has become a key driver of retention, engagement, and value across the entire organization—and one of the most powerful tools to sync employees with the success of their companies,” said Kate Winget, Chief Revenue Officer of Morgan Stanley at Work. “Equity plan engagement can have a direct impact on employee satisfaction and goodwill, whether it’s through education programs, executive support, or collaborating with providers on plan management. Expanding participant eligibility, education, and access to liquidity events can be a game-changer for companies and their talent.”

Additional details are available in Morgan Stanley at Work’s State of the Workplace Study here. As part of a series of findings from Morgan Stanley at Work’s fourth annual study, the business will also publish its findings on financial benefits and retirement benefits in the coming weeks.

Methodology: The data from the Morgan Stanley at Work Employees Survey and HR Leaders Survey comes from a survey of 1,000 U.S.-employed adults and 600 HR leaders for companies. The survey was conducted on behalf of Morgan Stanley at Work using an email invitation and an online survey between February 5 and February 12, 2024, by Wakefield Research (www.wakefieldresearch.com).

About Morgan Stanley at Work

Morgan Stanley at Work provides workplace financial benefits that build financial confidence and foster loyalty—helping companies attract and retain top talent. Our end-to-end solutions support your organization at any stage of growth through a powerful combination of modern technology, insightful guidance, and dedicated service; they include Equity, Retirement, Deferred Compensation, Executive Services, and Saving and Giving solutions. And while we’re fulfilling your company’s benefits needs, we’re also enhancing your employees’ financial well-being. Each benefit solution also includes our engaging Financial Wellness program, which provides employees with knowledge, tools, and support to help them make the most of their benefits and achieve their life goals.

About Morgan Stanley Wealth Management

Morgan Stanley Wealth Management is a leading financial services firm that provides access to a wide range of products and services to individuals, businesses, and institutions, including brokerage and investment advisory services, financial and wealth planning, cash management and lending products and services, annuities and insurance, retirement, and trust services.

About Morgan Stanley

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

This communication contains links to third party websites. These links are provided only as a convenience. The inclusion of any link is not and does not imply an affiliation, sponsorship, endorsement, approval, investigation, verification or monitoring by Morgan Stanley of any information contained in any third party website. In no event shall Morgan Stanley be responsible for the information contained on that site or your use of or inability to use such site. You should also be aware that the terms and conditions of such site and the site's privacy policy may be different from those applicable to your use of any Morgan Stanley website.

Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States.

© 2024 Morgan Stanley at Work and Shareworks services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240529443349/en/

Media Relations:

Jeanne Joe Perrone, Jeanne.Perrone@morganstanley.com

Lindsey Madnick, Lindsey.Madnick@morganstanley.com

Source: Morgan Stanley

FAQ

What percentage of companies offer equity compensation benefits in 2024?

76% of companies offer equity compensation benefits in 2024, according to HR leaders in the Morgan Stanley study.

How effective is equity compensation in driving employee engagement according to HR leaders?

95% of HR leaders say equity compensation is the most effective way to engage and retain employees.

What is the importance of liquidity events for private companies?

62% of private company employees and 86% of HR leaders consider liquidity events like IPOs very important.

Are employees aware of their company's equity compensation benefits?

Only 38% of employees are aware that their company offers equity compensation benefits.

How do employees perceive equity compensation as a long-term investment?

Employees' perception of equity compensation as a long-term investment has declined by 6% from last year.