How Millennials May Change Equity Compensation

By Emily Cervino, Fidelity Stock Plan Services. Earlier this year, I was lucky enough to attend the 17th-annual Global Equity Organization conference in Boston. I feel right at home at conferences like this: They are teeming with people who love equity compensation as much as I do. I always look forward to hearing what people are talking about, whether it is in the keynote speeches, the more detailed breakout sessions, or just networking over a lobster roll in the Boston-themed exhibit hall. These conversations give me a glimpse of what the future holds, and when I hear the same topic addressed in a keynote, in a breakout, and in the exhibit-hall chatter, I know it must be a hot topic. So, what’s everyone talking about? Millennials!

millennialWhy are millennials taking over the conversation? Because they are overtaking the workplace!  These 18 to 35 year olds have surpassed Gen Xers in the workforce and are on pace to represent more than 50% of the workforce in the next few years — and they are just entering their peak earning years. So it is no wonder that professionals who focus on attracting and retaining employees are consumed with the millennial mindset.

I suspect nearly everyone knows this generation is different. Raised on technology and craving nearly constant real-time feedback, this generation brings a new set of challenges — and opportunities — to the workplace. Specifically, with respect to equity compensation and millennials, it seems there are a few things we should ponder:

  • Public or Private? I’m not talking about publically traded or privately held! Here, I’m thinking of the information blur: What is shared broadly? What is held in confidence? This generation, more than any other, is comfortable sharing salary information. As a Gen Xer, I was raised to believe that salary information is highly confidential, but that was not the case for many millennials. Long-term incentives (LTI) are, by design, discriminatory in nature. The employer picks who gets grants, what kind of awards the employee receives, how much the grants are worth, and how frequently they are given. How does this play out when grant recipients willingly share grant amounts?
  • Talking on the Right Terms. I think the communication needs of millennials will drive a long-overdue communication makeover for equity programs. The printed prospectus and hefty plan documents of my early career rarely cut it in today’s communication plans. Now plan sponsors can do more to deliver laser-focused, perfectly timed communication and education. If it doesn’t look good on a smartphone screen, it isn’t going to grab the eyes of participants. Participants value what they understand, so the right communication and education to help this new generation of grant recipients understand and value their awards will pay dividends with respect to perceived value.
  • Design Decisions? Is it time to rethink some of the tenets of plan design to appeal to this growing workplace demographic? Will millennials feel more empowered and engaged when offered an equity choice, allowing them to pick either options or restricted stock, or a mix that feels right for them? Are smaller, more frequent grants a way to shape equity into a more continuous feedback loop? Are cliff-vesting schedules unfathomable to a generation used to instant gratification? A lot to think about here.

While I don’t purport to have all the answers, I’m hopeful that, as an old equity dog, this new generation will force me out of my comfort zone and I can learn some new equity tricks.

cervino_outdoor_landcape2-crop_webEmily Cervino is the Vice President, Fidelity Stock Plan Services and focuses on strategic marketing initiatives, thought leadership, and building Fidelity’s strong industry presence. Emily is a frequent speaker at equity compensation events, past president of the Silicon Valley Chapter of the NASPP, and a member of NASPP, GEO, and NCEO. Emily is a Certified Equity Professional (CEP), and she holds Series 7 and 63 securities registrations.

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Views expressed are as of the date indicated and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the author, and not necessarily those of Fidelity Investments.

 

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