Company equity: What it is, what you should know and do you want it?

Whether it’s the first job or a new job, understanding equity, and other compensation options an employer offers, can be extremely beneficial, or harmful, in the long run.

It’s easy to look back on decisions in a career path and shake your head at missed opportunities. Maybe an employee was offered equity at the start but needed something more immediate or perhaps company shares came into play, but the worker isn’t exactly convinced on the company’s long-term standing. It’s a risk that can be beneficial but that can only be judged in retrospect.

Know the facts

And sometimes, understanding what equity is and what it can do for your future might just be a big unknown. Take, for instance, Trista Kempa.

Kempa was one of the first 20 employees at WeWork, the trendy work-focused hub that provides spaces and services to satisfy startups, back in 2011. She recently wrote a lengthy Twitter thread shortly after rumors of WeWork heading to public markets began to surface. That move seems to likely happen as the company filed the necessary paperwork in late August in order for the move to be possible.

“Watching WeWork sit in the spotlight at the precipice of such an exciting, rewarding IPO event, I can’t help but wonder what it’d be like if it had all happened differently. Had I spoken up, would I have been awarded options?” she said.

Kempa reflected on her close to two years at WeWork, where she said she wasn’t offered equity options despite being one of the company’s first employees.

“I was 23, naive, and didn’t know what equity or options were,” she said. “I certainly didn’t know how much it could impact my financial future. When I and the first hundred or so joined the team, equity options weren’t a part of the deal and I thought nothing of it.”

Kempa, now the Director of Operation Strategy at Petal, a credit card company, said that as the company started to grow, equity started being offered to selected team members based WeWork’s “structured equity/[organization] chart model.”

Different job titles awarded different employees different shares, and despite her title — then as an Operations Associate — it didn’t give her the same strength as others, even if she had a hands-on impact working closely with the company’s chief operating officer, according to her thread. This created a conundrum for Kempa. When colleagues were beginning to have equity conversations, her manager told her that because her title wasn’t the same as others, she wasn’t open to equity options.

Kempa said that she interpreted that conversation as something definite — she accepted it and eventually moved on.

“Would I have been fired for asking? Would my early status have rewarded me financially today, as they prepare to IPO? Or, if I had spoken up and raised flags less, would I still be there, leading a department? Would I be celebrating my eighth year in NYC with money from an IPO?” she asked.

Kempa, who declined an interview with Ladders, said on Twitter she enjoyed her time at WeWork and doesn’t feel entitled to the missed out equity, but like others who’ve been in the same position, it creates an unknown that will never likely be answered.

Speak up

While a recent lawsuit filed against WeWork claims the company has been paying men much more than women, especially in stock-based compensation, understanding how equity is handed out can be a slippery slope. There’s no guideline to determine who can be awarded equity, but ultimately, it falls on the employee to take action and speak up, if it’s something that interests them, according to Bryan M. Kuderna, CFP, RICP, LUTCF.

Kuderna, the founder of Kuderna Financial Team and the author of  “Millennial Millionaire,” told Ladders that understanding equity and other benefits options can be tricky since there’s no silver lining answer. Young employees, especially Millennials, might not know what to do with equity even if it’s offered.

“If you’re a relatively young or new employee to any company, lots of time it’s our inclination to not rock the boat,” Kuderna said. “We’re more apt to say we’re happy to have a job and we’ll follow the lead until eventually there’s a seat of discontent or you start to see maybe what your peers at other companies are getting. When you get a little more seasoned, that’s when you have that conversation.”

A recent BlackRock survey found that just 15% of the Millennial portfolio invested in equity. Millennials are opting to cash in now due to obstacles like a higher standard of living and mounting student loan debt.

Kuderna said typically he advises clients against accepting equity because, like anything, it involves a risk.

“For every WeWorks, there are a thousand other companies that never make it,” he said. “A lot of people would say no … but on the flip side, if you’ve got a young professional willing to take a lot of risks and doesn’t have much financial pressure, they might be willing to forgo steady salary or a pay raise because they don’t have the financial pressure. Maybe they are a believer in the company. Nobody has a crystal ball, but I think most people rather thave cash in their hand rather than stock certificates with the hope that the company someday goes somewhere.”