Why is it important?
A fair and transparent equity policy is an important part of building a strong, cohesive international team that is committed to the success of the company.
First, it fosters a sense of trust and loyalty among team members and helps to create a positive and inclusive work environment by ensuring that all team members are treated fairly and equitably, regardless of their location or nationality.
Second, it helps to attract and retain top talent from around the world. When employees feel that they are being treated fairly and that there is a clear process for determining equity distribution (in addition to the salary distribution), they are more likely to be motivated and committed to the success of the company.
Third, it mitigates the risk of disputes or misunderstandings related to equity distribution. When team members understand the criteria used to determine equity distribution and can see that the process is fair and transparent, they are more likely to feel that they have been treated fairly and are less likely to raise concerns or objections.
How to set it up?
There are several steps you can take to set up a fair and transparent equity policy for your international team:
- Define your equity policy: Clearly outline the terms of your equity policy, including the types of equity being offered (e.g. stock options, restricted stock units, stock appreciation rights, etc.), the compensation amounts, the different levels of compensation, the vesting schedules, the leavers’ conditions, and any other parameters of the vesting and exercise of these options. You can refer to the Index Ventures Rewarding Talent guide to help you define those terms.
- Communicate: Make sure that all team members understand the terms of the equity policy, including how equity is distributed and how vesting works. Employees should also know what to expect in terms of exercise (and the related costs) and taxation at every time of the lifecycle of the options (vesting, exercise, and sale).Consider holding regular meetings or workshops to explain the policy in more detail.
- Be transparent about how equity is distributed among team members. This may involve sharing information about the equity distribution across different job levels or departments, or sharing information about the equity granted to specific levels within your company (e.g. individual contributors, manager, VP, etc.).
- Use a consistent process for granting and vesting equity to ensure that all team members are treated fairly. This may involve using a formal committee or using standardised criteria to evaluate equity grants.
A valuable tool: the equity grid
To that extent, setting up an equity grid - as you would do with salary - might be a good way to easily define and consistently implement your equity policy as new employees are joining and existing ones are evolving within your company, being promoted and receiving top-ups (i.e. additional grants on top of the initial equity package, also called refreshers).
With Easop, you’d be able to set up and leverage this equity grid: it’ll give you insights about your team's equity and make you save time when handling new grants or top-ups. For example, you would know if employees are below, above or in line with their equity grid level, and get suggestions about to-ups to match grid for employees below level (for example, after a promotion).
Staying effective in the long run
As your company grows and changes, it's important to regularly review and adjust the equity policy to ensure it remains fair and transparent. This could include reviewing the types of equity offered, the amounts being granted and the corresponding levels, the process for granting equity, or the terms and conditions of the equity. Don’t forget to consider soliciting feedback from team members to help inform any changes or updates to the policy!