Episode 3: Equity Story Hour: Part 1

Rodney:

Hi, I'm your host, Rodney Bolden, Head of Industry Engagement and Learning for Morgan Stanley at Work. Equity compensation is a powerful tool that can help create a better future for employees. On today's episode, we're going to hear stories from equity plan managers about how equity compensation made a difference in the lives of their employees. Before continuing, you may want to grab a tissue box. This is Invested At Work.

For employees, an equity grant today can pay huge dividends in the future. But sometimes employees don't realize the full value of their equity compensation. This story from Lori Serrano, Director of Equity Programs at a medical technology company, is an illustration of equity compensation making a real difference in an employee's life.

Lori:

I don't know if everybody remembers, back around 2008, there was a big mortgage bubble crisis, financial crisis. And a lot of employees had taken out more mortgages on their homes than they could afford. The value of their homes had dropped. And an employee came to me, she was in tears, just in tears. She said she was going to lose her home. She didn't know what she was going to do about it, but she's trying to get one more loan on her house, just one more loan. But her lender needed a statement from me that showed what the value, that as of that day, what was the value of her equity at the company.

Now, this was an employee that had been at the company for a number of years. We granted to employees every single year, but she really didn't understand what she had. I told her I would look into things and to come back in about 30 minutes. When she came back 30 minutes later, she did not need a loan any longer. She basically was a millionaire. She had no clue that all of these stock options that she'd been hearing about every single year when she received them, they had value of over a million dollars. So not only did she not have to get another loan, she paid off the loan she had and took a couple of vacations.

Rodney:

Good for her. That is an incredible story. That would make me ecstatic.

Lori:

I shed some tears, too. That was amazing. I have the best job in the world.

Rodney:

Yes, Lori, delivering that kind of news to employees in need may qualify equity plan managers as candidates for the title of best job in the world. However, sometimes helping employees with their equity benefits can get tricky. Stephen Baillie, Head of Equity at a data intelligence and analytics firm, recounted an experience where his sleuthing skills were put to the test.

Stephen:

I was at a different company and we were already public. And after you go public, not all shares actually go to a broker. They're holding the shares. If no one comes to collect the shares, those shares get escheated. They basically get given to a state.

Rodney:

Oh, wow. I didn't even think about that.

Stephen:

And held at a state. And so one of the projects that I undertook at that company was to reach out to all these shareholders who were in danger of having their shares escheated, or given to a state. And the fun part was tracking down who knew them in the company or who had the longevity to actually have a good contact information. Because invariably, that's mostly what the holdup is. The transfer agent no longer has good contact information. There was one employee, I reached out to them, they're like, "Oh, yes, that's my ex-spouse." And she received shares. They received shares as part of the divorce. It was amicable. It was amazing.

It worked out for both of us. He's like, "Here's her contact information, reach out." And so I did. And it was amazing because when I called to tell them, "Hey, you have these shares sitting in this account, they're ready for you to pick up." This person just started crying. And they're like, "You don't even understand. I need a new roof. This is absolutely going to change the life of myself and my children. And it just relieved a lot of burdens." It was very moving. And it was like, wow, what a wonderful testament to, one, how the company has done over time. And two, the care between even amicably divorced ex-spouses, and the fact that both of them all wanted to see each other benefit. I don't know. It was just a heartwarming story.

Rodney:

Like Stephen, Kris Masilamani, an equity compensation professional for a Fortune 500 specialty retailer, has seen his fair share of individuals use equity to build a better life for their families. Kris highlighted one participant who learned that his small equity investment had actually paid more dividends than he had anticipated.

Kris:

Good friend of mine actually joined a public company and the ESPP program. He's a cautious investor I guess, or a cautious participant, intrigued by the idea of company ownership. So he's like, "All right, I'm going to contribute what I can to an ESPP." He's a family guy, recently married, and he's got a cute little 2-year-old. They got this perfect house shortly after he joined this company. One thing that it was missing was a backyard. It's also got, from what I hear, a crazy dog that also needs the energy to run around. Behind their house, they have this abandoned lot. If they were able to acquire the lot, they could build this backyard and they would be the perfect home for this family. It turns out it's very expensive to not only acquire a small lot for a backyard, but also clear it.

Going back to his ESPP participation, he's like, "Alright, I've been cautious. I've only contributed here and there, and it's only been in the single digits of percentage of his salary. I wonder if I can tap into this." And the beauty of ESPP is that it's a little bit more accessible than maybe other benefits like 401(k) or deferred comp. And the discount coupled with favorable stock price increase, he looked at that cash amount or the valued amount on his account, and it more than covered the price of acquiring the lot and the dirt. From what I hear, grass is growing. The kid's running around, the dog's running around, the home value up 25%.

Rodney:

Wow, up 25%.

Kris:

Up 25%.

Rodney:

As we've heard, equity compensation programs can be a valuable benefit. However, many early-career employees often misunderstand their company's plan, or feel that they don't earn enough to participate in a meaningful way. In our episode's final story, Chelsea Bauer, Senior Equity Administrator at a search AI company, recalled one meeting with a group of young professionals who needed help making sense of their equity plan.

Chelsea:

When I went to Chicago, I had just the most lovely group of salespeople. And a lot of them were in their early 20s. This is their first gig. And there was a lot of fear that was embedded in our conversations. Fear turns off that frontal lobe, they just can't think. They throw up their arms and just panic. So what I would like to do is get in front of them and just put a friendly face to something that scares a lot of people, taxes and money. So we would go to the office and do our presentation, which is hit-and-miss with how many people we can drag away from their desks because they are salespeople. So they're rather busy.

Rodney:

Absolutely.

Chelsea:

So we would host office hours. And I had the most lovely group of people who would just send their friends over. They're like, "Hey, I don't know what to talk about, but so-and-so sent me over here, so let's do it." So I'd walk them through the account because they can't navigate it if they don't understand it. So we'd walk it through. And I was lucky enough to be visiting during ESPP open enrollment. And I had this one lovely woman who was like, "I can't participate. I just can't afford the ESPP program." So I'm like, "Well, let's look at that." Let's pull open your pay stub. What's 1%, 1% of your gross sum? And we're going to take that number and we're going to do it 12 more times, over six months. So we had that value. Okay, let's do a theoretical purchase at the end of the six-month period.

This will leave you with this amount of shares. This share amount, this value can grow over time. Can you live without that single Starbucks each week? We had baristas on staff at the time, so I think you could. And once it clicked for her that I can do this at 1%, I don't need to be in at 15 or 10% when I'm living in a really expensive city, and I don't think I could live without that income, but 1% I can live without. And that adds up over time. And she was just so empowered that we signed up right then and there, and she was so excited. And it really is what cemented being able to work directly with employees. That's just brought me so much joy.

Rodney:

Equity compensation isn't just a financial benefit, it can be a pathway toward a better future for employees and their families. Stay tuned for part two of our Equity Story series where we'll hear from more industry professionals about their approach to effective communication and employee education, including one compensation mishap that you won't believe.

Please join us for the next episode of Invested at Work. If you haven't already, remember to subscribe and share it with your friends and colleagues. Be sure to visit us at morganstanley.com/atwork for more insights on workplace financial benefits and how Morgan Stanley may be able to help you. In the meantime, I hope you'll consider what makes you and your employees invested at work. Invested at Work is brought to you by Morgan Stanley at work, produced by Studio Pod Media, and hosted by me, Rodney Bolden. Our executive producers are Fiona Kelsey, Lisa Boyce, and TJ Bonaventura. Our engineer is Alejandro Ramirez, and our writer is Dan Pelberg.

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