UBS has started an interesting new research series it calls UBS Participant Voice, which will include semi-annual surveys. The first survey introduces the UBS Equity Award Value Index in a study of participant attitudes about equity compensation and wealth management. In the survey, the researchers categorized employees into different groups according to the number of vestings they have experienced to reveal how they perceive their stock grants. The results clearly show that the more experience employees have with equity awards, the more they value them.
Among the findings of interest:
1. Slightly less than half (47%) of the participants view equity compensation as a way to build wealth, while about 20% see it as a lottery ticket.
2. The more vestings employees have experienced, the more they value equity awards and the more they are likely to position them as part of a financial plan. While the survey found that at least some employees at every level of vesting experience perceive equity compensation as "a way to build wealth," 55% of the employees with six or more vesting experiences felt this way.
3. Those most likely to see equity compensation as "a paycheck supplement" had three to five vestings, while those most likely to see equity compensation as a "lottery ticket" had fewer than three vestings.
4. Those with the most experience of stock grants were more likely to see equity comp as an important motivation for taking a particular job (48% of those with the most vestings and 19% of those with the fewest) and staying at a job (51% of those with the most vestings and 29% of those with the fewest), and as an important factor in accumulating wealth (51% of those with the most vestings and 20% of those with the fewest).
5. While base salary, health insurance, and 401(k) plans were more important than stock grants in the decision about whether to accept a job offer, participants with over five vestings ranked equity awards as slightly more appealing than a cash bonus. For these participants, when it came to the question of their ability to accumulate savings/wealth over time, company stock grants ranked above cash bonuses, company 401(k) contributions, and pension plans.
6. Employees with three to five vesting experiences are the most engaged with their grants. They are the participants most likely to check the stock price, model the potential value of the award, think about what to do with the proceeds, or talk with a tax advisor.
Stock plan participant surveys have become popular (see, for example, our recent blog entry about a new survey by Morgan Stanley). These can help companies better design their stock plans and their efforts in employee communications and education, and they can help financial advisors better serve their clients.