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

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.

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