Making Equity Compensation Plans More Inclusive for Women

Women are less likely to own stocks or join equity programs. Here’s how companies can make equity plans more inclusive and why it matters.

Compensation plays a crucial role in building an engaged and committed workforce. Equity incentive programs, such as employee stock ownership plans (ESOPs) and employee stock purchase plans (ESPPs), can be effective tools for helping employees achieve financial wellness—which supports a company’s recruitment, retention and reputational goals. But women are less likely than men to take advantage of these programs.1


By making these plans more inclusive and broad-based, companies may realize benefits for both their employees and their bottom line. Here’s a look at how women’s career paths can differ from men’s and how a well-structured equity compensation program could women achieve financial wellness while supporting a company’s recruitment and retention efforts.  


Women’s Careers: A Different Path

Women make up 47% of the U.S. workforce2 and earn more college and advanced degrees than men,but their career—particularly mid-career—experiences tend to be vastly different from those of their male counterparts. These differences impact women’s financial wellness, their overall career trajectory and their likelihood of participating in equity programs.


Let’s trace the hypothetical careers of Sarah and Michael.


Sarah and Michael have similar backgrounds, education and career aspirations. They join the same company at the same entry level, where they earn the same pay and have access to the same benefits. Both are viewed as rising stars, and both advance quickly. At this point, Sarah and Michael are on an equal footing.


The divergence starts mid-career. They both find partners and start families. Sarah, like many women, decides to pause her career and take a few years out of the workforce to take care of her young family.4 When Sarah rejoins the workforce, she secures a role that prioritizes flexibility (which often means less pay) to account for her caregiving responsibilities.5 In contrast, Michael does not exit the workforce or the organization, and despite having a new family continues to advance in his career, earning higher pay, gaining access to benefits like equity compensation, and generally building greater amounts of wealth.  

Research from Financial Health Network shows that 72% of women experience financial stress, compared with 53% of men.

As both near the ends of their careers, the cumulative impact of their mid-career differences means Sarah will likely have less saved for retirement—despite a longer life expectancy—than Michael.Throughout Sarah’s career, she has probably carried higher levels of financial stress than Michael and is likely to remain worried about her financial prospects as she enters retirement.7 According to CNBC’s Your Money Financial Confidence Survey, 72% of women experience financial stress, compared to 67% of men.7


While every woman’s experience is unique, Sarah’s remains all too typical despite the increased focus on strategies to recruit, retain and promote women. Unfortunately, women are less likely to own stocks or participate in equity programs.As in Sarah’s example, women tend to take time off during their careers to have children or prioritize flexibility overpay to account for caregiving duties. At the same time, the gender pay gap impacts lifetime career earnings (beyond taking time out of the workforce), and women tend to occupy professions and roles that are lower paid and may not offer equity-based compensation benefits.4


Financial Wellness Solutions Can Help

While every woman’s experience is unique, Sarah’s remains typical despite an increased focus on strategies to recruit, retain and promote women. The good thing is that companies can implement specific policies designed to help women stay engaged at work, including offering flexible work, empowering managers and measuring employee progress.8 Within the financial wellness umbrella, ESOPs, ESPPs and other forms of equity compensation are powerful tools for addressing some of the challenges women face.


To make their equity compensation plans more inclusive, businesses may also want to better understand women’s career paths and take active steps to balance equity participation rates. Corrections may start with transparency, education and an internal oversight body able to assess compensation plans and reset the career level and pay range when plans kick in. Creating a balance of men and women might require expanding the plans to lower levels, making shares available sooner, freezing rather than losing vesting time when taking a leave or shifting to a broad-based ESPP that may be more inclusive than a standard ESOP.

Improved Plan Participation Helps Both Employees and Businesses

Moving towards inclusive, accessible and broad-based equity plans may significantly improve women’s financial wellness and benefit your company’s long-term bottom line. Here are three ways: 

  1. 1
    Higher Retention

    While there is no perfect solution for recruiting, retaining and advancing women, equity compensation programs may help close that gap. Had Sarah’s organization offered a broad-based equity compensation program early in her career, she may not have left. Organizations with these types of programs tend to have less voluntary turnover and higher retention rates, including higher retention of women.7

  2. 2
    Increased Retirement Savings and Improved Financial Security

    On average, women have less saved for retirement than men but are expected to live longer.The potential shortfall of retirement savings can be a significant source of stress—and thus workplace distraction—for women. ESOPs and ESPPs may help alleviate that concern by generating higher savings, improving financial confidence and putting Sarah in a better position to meet her retirement goals.9

  3. 3
    A Great Place to Work

    Most businesses want to be known as a great place to work, as it may attract talent, help retention and make life at work better. Equity-based compensation may help support that goal. Employees with access to equity programs are more likely to report that their employer has a collaborative culture, that they are getting a fair share of compensation and that their company is an “excellent place to work.”

When Employees Thrive, Companies Benefit 

Women face different career challenges than men, and appreciating these different paths is crucial to improving the recruitment and retention of women, as well as the reputation and productivity of the companies they work for. 


Learn more about how Morgan Stanley at Work, can support your equity compensation plans and provide inclusive financial wellness solutions.

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