• Morgan Stanley at Work’s 2022 State of Equity Plan Management Report highlights how public and private companies implement and manage their equity compensation plans around the world

• The need to scale stock plans is on the rise as HR decision-makers leverage equity compensation to attract, retain and motivate employees throughout their organizations

Morgan Stanley at Work today released new proprietary research revealing that amid the “Great Resignation,” equity compensation has become more critical for public and private companies competing for talent across the globe. To gain an edge, companies are rolling out creative solutions in their plan design to improve retention.

Morgan Stanley at Work’s new research report, The State of Equity Plan Management at Public and Private Companies, also noted that equity compensation is one piece of a larger puzzle when it comes to attracting and retaining talent, as employees are focused on their entire work experience.

The 2022 report was commissioned to benchmark company mindsets and behaviors surrounding equity plan management and better understand how organizations around the world are implementing and managing equity compensation plans. The research also provides insights into the current landscape and industry trends surrounding equity plan management, employee engagement, related priorities and challenges and the types of plans currently offered.

Among the report’s key findings:

• The primary purpose of equity compensation remains to attract and retain talent. Nearly one in three (32%) HR decision-makers indicated the number one goal for offering equity compensation is to attract and retain talent. This is especially timely as nearly half (47%) reported their workforce attrition in 2021 was higher than 2020.
• “Greatness” remains elusive. The report highlights that 50% of equity leaders reported their current equity compensation plan is at least “good” at retaining talent, but only 38% indicated exceptional performance. Of those that indicated their current equity compensation plan was not successful in talent acquisition or retention, 55% reported that employees are leaving for opportunities that offer stronger benefits or more work-life benefits, irrespective of equity offered.
• Scale is critical. “Expand equity to a wider range of employees” is the second most popular strategy among HR decision-makers when it comes fighting attrition, after salary raises. This initiative is especially pronounced in Canada and EMEA, at 46% and 39%, respectively. Nearly one in three U.S. HR decision makers are also looking to expand their equity compensation programs.
• Frequent communication correlates with high engagement. Among employers with employees who are highly to moderately engaged with their stock plan, 48% are communicating to participants weekly to monthly. On the other end of the spectrum, among employers with low to no engagement, 70% are communicating annually or on an ad hoc basis.
• Plan design is evolving. Nearly 4 out of 10 of public companies (35%) are providing lookbacks and discounts for employee stock purchase programs. Almost a third of U.S. and Canadian companies (32%) are offering shorter and more flexible vesting schedules that cater to employees’ needs.

“This report shows that even as the way we work continues to evolve, equity compensation is only increasing in importance as a key tool in attracting and retaining the best talent throughout an organization,” said Scott Whatley, Managing Director & Global Head of Equity Solutions, Morgan Stanley at Work. “In 2022, companies can not only get a leg up in the war for talent by updating their equity compensation plans, but also significantly help employees reach their financial goals. Equally important is for companies to find the right stock plan administrators to help scale these benefits so that all employees—from the junior ranks to the very top—can understand, engage with, and ultimately derive satisfaction from the equity.”

For the first time, these insights include opinions from both public and private companies, whereas previous iterations focused on the private market. Despite their differences in size, ownership structure, and industry, views across public and private companies regarding attrition, employee education, and administration were markedly similar, with a few notable exceptions:

• Private companies lag in offering equity to more employees. While equity compensation is a key benefit for companies to attract and retain talent, just 35% of private companies cite providing this benefit to executives and all employees, vs. 43% of public companies.
• Private companies are not as keen on expanding equity compensation. When asked about initiatives to retain employees in the past year, 48% of public companies are expanding their offerings to a wider range of employees, vs. 35% of private companies.
• Cliffs are less prominent among private companies. Amid new demand for flexibility and competition for talent, 63% of private companies state they include a cliff vs. 83% of public companies.

“As private companies are staying private longer, the need to effectively manage and update their equity plans to evolve along with participant needs has never been more critical,” said Jeremy Wright, Managing Director and Co-Head of Morgan Stanley at Work’s Global Private Markets. “Employees and job seekers have become savvier when it comes to equity compensation, giving private companies and founders a major opportunity to use their equity plans to attract like-minded leaders to help build their businesses.”

The full findings of Morgan Stanley at Work’s 2022 State of Equity Plan Management Report can be found here.

Methodology: The findings in the 2022 State of Equity Plan Management Report are based on proprietary, third-party research and survey data conducted by Rebel & Co. of 408 senior corporate decision-makers—including CEOs/Founders or equivalent, Chief Human Resources Officers, Chief Financial Officers, Designated Equity Plan Administrators and Certified Equity Professionals—employed at private and public companies across various industries globally participated in market and client surveys, as well as one-on-one interviews. Company sizes ranged from under 100 to over 1,000 in worldwide employee headcount. Respondents were interviewed using an online panel survey, with video interviews conducted in October 2021. The range of issues covered included attitudes and perspectives relating to equity and plan administration, as well as priorities/challenges, types of plans currently offered, and employee engagement.

About Morgan Stanley at Work

Morgan Stanley at Work offers a suite of financial solutions, which spans Equity Compensation through Shareworks and E*TRADE Equity Edge Online, Retirement and Financial Wellness Solutions. Morgan Stanley at Work combines cutting-edge planning and Morgan Stanley intellectual capital and financial education delivered through multiple channels to enable employees to build a holistic plan to achieve their financial goals. Shareworks is provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, and Equity Edge Online® employee stock plan solutions are offered by E*TRADE Financial Corporate Services, Inc., both parts of Morgan Stanley at Work and all wholly owned subsidiaries of Morgan Stanley.

Rebel & Co. is neither an employee of, nor affiliated with, Morgan Stanley Smith Barney LLC (“Morgan Stanley”).

About Morgan Stanley Wealth Management

Morgan Stanley Wealth Management, a global leader, 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 (NYSE:MS) is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals. For more information about Morgan Stanley, please visit www.morganstanley.com.

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CRC 4291608 (2/2022)

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