The Right Way to Grant Equity to Your Employees

Andy Rachleff, co-founder of Benchmark Capital, breaks down the ideal plan for granting equity to incentivize loyalty.

“The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. Before companies like Fairchild andHewlett-Packard began the practice fifty years ago, distributing stock options to anyone other than top management was virtually unheard of. But the engineering tradition that spawned Silicon Valley was much more egalitarian than traditional corporate culture.”

Steven Johnson, The Peer Society

The equity culture among young technology companies is almost universal. When implemented properly, broad employee ownership withina company can:

  • Align the risk and reward of employees betting on an unproven company.

  • Reward long-term value creation and thinking by employees.

  • Encourage employees to think about the company’s holistic success.

Source: The Right Way to Grant Equity to Your Employees