Pandemic drives employees to sell equity compensation
Ninety-five percent of millennials who recently exercised equity options said the COVID-19 crisis influenced their decision.
Market volatility triggered by the COVID-19 pandemic is causing a substantial percentage of employees to exercise or sell equity capital to meet immediate financial needs, especially among younger workers, according to a study of 1,000 equity compensation participants by Schwab.
Forty-three percent of those surveyed said they have exercised or sold equity compensation or employee stock purchase plan (ESPP) at some point in their career. Of those, 67 percent said they did so recently because of market volatility and economic downturn related to the pandemic.
Millennials surveyed were significantly more likely than older generations to have tapped into equity compensation during the pandemic. Ninety-five percent of millennials who recently sold or exercised equity compensation said the pandemic influenced their decision, compared with 44 percent of those in older generations.
In addition, 27 percent of millennials surveyed said they sold equity compensation due to financial stress related to the pandemic, compared with 13 percent of older generations.
Respondents sold equity compensation for other reasons as well. Thirty percent said they regularly exercise or sell equity as part of a long-term plan, while 29 percent said they did so because they felt market conditions were favorable and 28 percent each said they wanted to diversify their portfolio or make a large purchase.
The uptick in equity selling comes at a time when employees are placing a greater value on equity compensation as an employment benefit, the study found.
More than three-quarters of survey participants said they view equity compensation as an essential or very important benefit that helps them build wealth and participate in the growth of their employer.
The vast majority — 90 percent — of employees said they would choose to work for an established public company with an equity compensation program if they had a choice, up three percent from last year.
Millennials in particular value equity compensation when making employment decisions. Half of millennials said equity compensation was one of the main reasons, if not the main reason, that they took their job.
“Employees, especially millennials, are demanding equity compensation as a highly desirable component of workplace benefits packages,” said Amy Reback, vice president of Schwab Stock Plan Services. “Employers who offer equity compensation beyond the C-Suite as part of their overall employee value proposition significantly differentiate themselves from those who only offer health and retirement benefits. Offering equity compensation automatically gives employees a stake in the future success of the company and helps employers to attract and retain the best talent.”
Half of all employees surveyed said they plan to use their equity compensation to help finance retirement, while smaller percentages plan to use it for other purposes, including paying off debt (9 percent), financing children’s education (8 percent), financing lifestyle in the short term (8 percent), short-term emergencies (7 percent), and buying a home (6 percent).
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.
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