4 Ways To Reframe Equity Compensation For Women

Equity compensation allows women to share more directly in the growth and success of organizations

The last few years have proven that there is still work to do when it comes to gender inclusion and equality in the workplace. Consider that women made up 52% of the US workforce in 2020,¹ but as the dust of the great resignation and rehiring settles, women have reached an all-time high of just 32% of director roles on the boards of S&P 500 companies as of 2022.² 

One lever to pull is in our equity incentive programs, a sometimes underutilized tool that can help support female talent in their career and financial goals.

Consider these four ways companies can leverage equity plans to better include women—in turn empowering not just the next cohort of leaders, but the whole organization. 

The Situation

We know that men and women with similar backgrounds may begin their careers on the same footing but often see diverging trajectories: Data shows women provide a disproportionate amount of caregiving in their personal lives, either taking leave or leaving the workforce completely at higher rates than their male counterparts. They’re therefore less likely to join equity programs at work,³ experience more financial stress,⁴ and may tend to be more conservative in their investments.⁵ At the same time, women still face a gender pay gap that whittles down their lifetime earnings.6 By the time retirement comes along, women typically have much less saved than men, despite a longer life expectancy.⁶ 

These issues have a ripple effect on a woman’s career progression, access to wealth-building opportunities like equity compensation, and overall financial stability, as well as a company’s potential to unlock a reservoir of developing talent. Within the context of your overall workplace benefits suite, equity can play a strategic role in addressing many of the societal issues behind stubborn gender inequity and help transform your company into an even better place for women to build their careers. 

Solutions

Many of your female employees may not have equity compensation on their radar, so it’s key to communicate what this benefit is, how women can access it, and how they can make the most of it. Start here:

1. Make Equity Compensation More Available

We’ve found that 42% of business leaders say women and minorities experience barriers to career advancement in their organizations,⁷ so if your equity program is only available to company leaders, many women in your company may not be included. How are you addressing this? Some tactics we see working for companies include making shares available faster, freezing rather than losing vesting time when employees take leave, or shifting to a broader-based Employee Stock Purchase Plan (ESPP) that may include more lower-level employees. As an added boon, organizations with more broad-based equity compensation programs tend to have less voluntary turnover and higher retention rates overall—including among women.⁸

2. Make Equity Compensation Make Sense

Invest in the participant experience to make sure your equity plan is as digestible and accessible as possible. A recent report highlighted⁹ meaningful financial education as a high-impact tool for employers to gain a competitive advantage in a tight labor market, yet less than half of stock plan participants (46%) say they know how to reach someone to ask questions about their stock plan.¹⁰ Work with your provider to connect participants to robust education, personalized support, and additional financial benefits. Women especially can benefit from financial literacy and benefits education tailored to their unique needs: Women are less likely to say they understand workplace financial benefits and more likely to say they want clearer explanations, easy access, and simplified enrollment.⁴ An intuitive digital experience can also play a critical role and help drive employee engagement and satisfaction, especially if you are working to scale your equity benefits deeper into the organization.

3. Make Financial Benefits Holistic

Connecting your equity program with holistic solutions that address the full employee experience can add even more value for female staff. Consider supplementing your equity program with access to additional financial wellness benefits that can offer women greater insight into their financial potential and how to plan their finances more strategically. All these resources can help bring equity compensation into a more meaningful and tangible context and better equip women to build holistic financial security for themselves. For example, access to a Financial Advisor through workplace benefits can help participants with creating and implementing a personalized plan to build wealth and tackle their individual challenges.

4. Make Progress a Priority

Balancing equity participation by gender will likely require intentional work as well as time, but the potential payoff is significant: Morgan Stanley Research has found that distributing women across all levels of an organization correlates with higher average returns on company stock prices and lower return-on-equity volatility—making gender-diverse companies more resilient.¹² 

Not only that, but equity compensation allows women to share more directly in the growth and success of the companies they serve and can be especially important for your younger employees who are seeking a real stake in the game. With wise management, your equity compensation program can evolve to become a useful tool for women and help support them in developing thriving careers and wealth. As employers continue to work to revamp and restore lasting gender equity across their organizations, equity plans are an important area to gain ground—significantly improving outcomes both for women and the companies that hire them. 

Notes

1. US Bureau of Labor Statistics, Women in the labor force: a databook : BLS Reports: U.S. Bureau of Labor Statistics
2. The 2022 SpencerStuart Board index, SpencerStuart 2022_us_spencerstuart_board_index_final.pdf
3. Women’s Retirement Outcomes | Morgan Stanley at Work
4. Supporting Financial Health for Millennials and Women in the Workplace — Financial Health Network (finhealthnetwork.org)
5. Support Women’s Financial Wellness | Morgan Stanley at Work
6. 2022 State of the Gender Pay Gap Report | Payscale Research
7. Equity compensation & Equality Report | Shareworks by Morgan Stanley
8. Do Broad‐based Employee Ownership, Profit Sharing and Stock Options Help the Best Firms Do Even Better? - Blasi - 2016 - British Journal of Industrial Relations - Wiley Online Library
9. EBRI/Greenwald Workplace Wellness Survey
10. Stock Plan Survey Results 2022 | Morgan Stanley at Work
11. Strategic Equity Compensation Plans | Morgan Stanley at Work
12. Sources: Refinitiv, FactSet, Morgan Stanley Research; Based on an Equal weighted average 12M forward return for the North America Top 1/3 fractile of HER score versus the excess equal weighted average 12M forward return for the region, 2011-5/2019; Note: Past performance is not indicative of future results.

Kate Winget is Chief Revenue Officer, US Public Equity Solutions at Morgan Stanley at Work. Connect Kate Winget