Employee stock awards can bolster company loyalty

Are your workers invested in your business growth?

Employee stock awards can bolster company loyalty

When businesses allocate shares of stock to their teams, their employees are also more likely to stay committed to achieving company goals. That’s because they have skin in the game, a new study on company stock awards revealed.

Employees with stock grants are twice as likely to work harder “knowing that the value of their stock plan award may increase as their company’s stock price increases,” according to researchers from Fidelity Investments which led the study. The award lets employers share not only the benefits but also the responsibility of growing the business with their most crucial stakeholders: their own employees.

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In the process, workers tend to be better financial planners: they are said to be thrice as likely to factor in the monetary value of their stock plan into their compensation and benefits package, and also twice as likely to manage their awards. They learn to exercise their options and gain deeper insights into the business of trading.

“Company stock awards can be a great way to motivate and reward employees, as long as employees understand the best way to manage their awards,” said Mark Haggerty, who leads stock plan services at Fidelity. “Employees not only need to understand how their company stock plan works, but how their company stock awards work within their own personal financial picture.”

Nearly three in five employees (59%) who take equity compensation into account “feel more confident about their ability to make good decisions” regarding their awards, compared with a third of employees who do not include equity compensation into their financial planning, researchers said.

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From the vantage point of HR, awarding stocks to employees has also been shown to inspire team spirit. Employees tend to be thrice as likely to feel loyal to their employer. The stock awards make them feel a “sense of ownership” in the company, researchers said.

Organisations continue to offer company stock awards as a way to attract and retain top talent, as well as to reward top performers, Haggerty said. “Including company stock in financial planning is key to unlocking the real value of these awards – not only will employees have a greater appreciation of their company stock plan, but they will [also] understand how company stock awards can contribute to their overall financial well-being.”

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