{"id":7538,"date":"2020-08-06T17:17:41","date_gmt":"2020-08-06T17:17:41","guid":{"rendered":"http:\/\/www-staging.carta.com\/sg\/?p=7538"},"modified":"2021-03-05T06:54:29","modified_gmt":"2021-03-05T06:54:29","slug":"creating-equity-education-program","status":"publish","type":"post","link":"https:\/\/www-staging.carta.com\/sg\/blog\/creating-equity-education-program\/","title":{"rendered":"How do I teach my employees about equity?"},"content":{"rendered":"

At Carta, we believe <\/span>employees deserve equity<\/span><\/a> and<\/span><\/i> equity education. After all, holding equity in a company can generate <\/span>incredible financial returns<\/span><\/a>. Your employees need to know how equity works in a startup so they can make the best decisions for their personal and professional situations.<\/span><\/p>\n

The importance of equity education<\/span><\/h2>\n

As <\/span>companies stay private for longer<\/span><\/a>, it\u2019s important for employees to understand what it means to have equity in a company. Equity education can help increase job satisfaction, facilitate company growth, and improve workplace culture.\u00a0<\/span><\/p>\n

On the flip side, a lack of equity education can contribute to <\/span>inequalities<\/span><\/a> in the workplace. When employees don\u2019t have enough information about their equity, they may end up making hasty decisions, accepting unfair offers, or missing out on opportunities to grow their equity. Over time, employees might feel undervalued or dissatisfied, then choose to leave the company.<\/span><\/p>\n

Providing equity education is a simple way to improve retention and create a more inclusive workplace. Building an equity curriculum forces you to <\/span>review your company\u2019s employment equity program and eliminate unfair practices<\/span><\/a>. And when employees feel informed and empowered, they may be more inclined to exercise their stock, take a personal interest in the company\u2019s success, and stick around to reap the benefits of their equity.\u00a0<\/span><\/p>\n

Equity education at Carta<\/span><\/h2>\n

At Carta, we\u2019re committed to providing ongoing equity education for all our employees. Here are the main ways we teach employees about equity:<\/span><\/p>\n

In our offer letter<\/strong><\/p>\n

Education starts with our <\/span>offer letter<\/span><\/a>. We want all future Cartans to understand 1) how to value their job offer and 2) how to <\/span>compare it to other job offers<\/span><\/a>, especially those from public companies, where equity is usually more liquid and easier to understand.<\/span><\/p>\n

Our offer letters include the following:<\/span><\/p>\n

    \n
  1. A clear breakdown of employee benefits<\/span><\/li>\n
  2. An explanation of what vesting means and how stock options vest at Carta<\/span><\/li>\n
  3. A compensation summary that lists the numbers employees need to <\/span>value their equity offer<\/span><\/a>, including the number of options granted, their strike price, the projected preferred price, and the projected grant notional value<\/span><\/li>\n<\/ol>\n

    \"\"<\/p>\n

    During onboarding<\/strong><\/p>\n

    We host a session dedicated to equity education during our two-day onboarding program, Launch. We make it fun by breaking the onboarding class into groups and playing Jeopardy, covering questions like, \u201cWhy are <\/span>ISOs<\/span><\/a> more favorable than NSOs?\u201d and \u201cHow long is a 409A valuation valid for?\u201d This doesn\u2019t just help new Cartans understand their personal equity\u2014it also gives them the information they need to do their jobs better, particularly if they\u2019re in customer support, product, or marketing.<\/span><\/p>\n

    During Launch, we also give new employees a guide that includes equity terms, FAQs, and helpful questions to ask their lawyers, accountants, or financial advisors. We share the <\/span>FAQ<\/span><\/a> among our clients, too.<\/span><\/p>\n

    On our blog\u00a0<\/strong><\/p>\n

    We post articles, guides, and tools on our <\/span>blog<\/span><\/a> that shed light on complex equity topics, like how to <\/span>sell private shares<\/span><\/a> or what happens to your equity <\/span>when you leave a company<\/span><\/a>. Whenever we publish a new article, we share it on social media and in large public Slack channels\u2014we don\u2019t just want current and potential Cartans to have access to equity information; we also want to share resources with employees in every industry who want to learn more about equity.\u00a0<\/span><\/p>\n

    In our product\u00a0<\/strong><\/p>\n

    At Carta, we build equity education into our business model. One way is by including links to educational materials in our transactional emails. When employees get a new grant or vest options, we send them links to learn more so they can make informed decisions.\u00a0<\/span><\/p>\n

    We also highlight content in our app and on our site, so when our employees want to <\/span>exercise their options<\/span><\/a> they can understand what they\u2019re getting into.\u00a0<\/span><\/p>\n

    How to craft your equity education program<\/span><\/h2>\n

    Teaching your employees about equity is an investment in your company\u2019s success. If you want to build an equity education program, here are four tips to keep in mind:<\/span><\/p>\n

    1. Be transparent\u00a0<\/span><\/h3>\n

    Good equity education comes down to <\/span>transparency<\/span><\/a>. One of the best things you can do is commit to transparency in your offer letter. Break down the entire compensation package, including the salary, stock options, and benefits, as well as the system or formula you used to arrive at those numbers. Explaining <\/span>why<\/span><\/i> you offer the equity you do can help eliminate confusion, separate you from your competition, and foster trust with employees.\u00a0<\/span><\/p>\n

    Buffer, a company that creates social media engagement tools, has an open equity policy where they share their <\/span>equity formula<\/span><\/a> and how much they offer each employee. Their goal is to demystify equity for employees who may not understand what it means or how it works.\u00a0<\/span><\/p>\n

    It\u2019s also a good idea to explain the benefits and potential drawbacks of the equity options you give employees. That\u2019s what Gusto, a company that makes payroll and HR software, does. In an effort to treat their employees as rightful part owners, the company gives them the option to either <\/span>exercise early<\/span><\/a> so they can potentially take advantage of tax benefits, or exercise up to 10 years after leaving the company, giving them more time to evaluate whether exercising is a good idea and come up with the money if they decide it is.\u00a0<\/span><\/p>\n

    2. Develop an equity education training and resource guide<\/span><\/h3>\n

    It\u2019s a good idea to host educational sessions for new employees who need to learn the fundamentals of equity.\u00a0<\/span><\/p>\n

    In addition to answering employee questions and going over equity basics, budget enough time to discuss more complicated topics, like how <\/span>equity is taxed<\/span><\/a>. You may also want to create a list of resources for employees that includes <\/span>equity terms<\/span><\/a>, equity formulas, and tips for talking to an accountant or financial planner.\u00a0\u00a0<\/span><\/p>\n

    Here are some links and resources you may want to include in your equity guide:<\/span><\/p>\n