Equity Award Practices and New Developments

2018.11.18  Broad-based Equity Awards: Does Amazon Lead Again?  In the equity award world, there is a regular debate about whether employers should make equity awards below the key employee level. For rank-and-file employees, cash bonuses and other workplace benefits (such as flexible hours) motivate better than low-levels of equity awards. Amazon seems to have reached that conclusion based on recent reports that RSU awards would be eliminated for hourly workers because their significantly increased hourly wage will make their compensation "more immediate and predictable."

In a stock market that has bubbled-up, it is understandable to shift away from stock options and other equity awards because employees feel a "loss" if the value of their awards falls with a drop in stock price. Just to be clear: Amazon did not cite that concern. And other major employers (e.g. Apple and Starbucks) continue to pursue broad-based award programs, for reasons well summarized in this mystockoptions article. From Amazon's shift from RSU grants to increased hourly pay, the real lesson should be as follows: the best companies should regularly assess the benefits, costs, risks, and alternatives to their stock award programs. Coincidentally, they should regularly fine-tune their programs to be sure they best advance company interests ... such as through improved claims procedures (to efficiently resolve litigation) and through better-considered trade secret and post-employment protections (such as non-competes).