How Much Equity Should Companies Share with Employees?

Closely held companies often call us to ask questions about how to set up and run an equity compensation plan for employees. One of the first questions they ask is how much equity they should share. When I ask them what they have in mind, almost invariably they say 10%. Somehow, it just sounds like the right number. And they have heard that is what other companies do, so it must make sense. Of course, if people share 10% because they hear other companies share 10%, it becomes a self-fulfilling trend.