Surveying the scene: analyzing the trends in equity compensation report

From pain points to current trends, the impact of recent regulatory changes to how companies can make their offering stand out from the crowd and so much more, J.P. Morgan Workplace Solutions recently brought together a panel of some of the most informed minds on the employee equity compensation scene for a wide-ranging discussion on where we are now and what to look out for in 2025.

Taking the findings of our Trends In Equity Compensation: 2024 Report as a launching point, host Lauren Jenkins, Head of Executive Participant Servicing, J.P. Morgan Workplace Solutions, facilitated a four-person panel on identifying and then deep-diving into a number of important topics as the group assessed the current state of play in employee equity compensation.

Pain points in equity compensation

Early in the conversation, Jorge Martin, Head of North America, Equity Services, J.P. Morgan Workplace Solutions, highlighted communications as a potential pain point and targeted education as a way to address whatever concerns or impediments may arise.

“How do you communicate to an employee the benefit that you have given them? Salary is fairly easy for them to understand, but when you start granting options or restricted stock, then you have to explain what a vest schedule means and about taxation around those equity instruments. Basically, it becomes more complicated. That being the case, education then becomes a really key area where companies need to focus when they’re offering equity to employees, and it’s not a one and done. It is important to offer them different avenues to gain that education, at grant, at vest, at sale,” he said.

On a related point, Jorge added that it is also important to try to keep equity plans as straightforward as possible.

“Over the course of the last decade or so, there were a lot of very unique, exotic plans put out, but the more exotic the plan, the harder it is for you to tie the benefit that the employee is getting to the success of the company, and the more you need to consistently educate them about the benefits,” he said, urging more focus on simplicity in plan design.

Standing out from the competition

Among other topics, Ryan Shreero, Executive Services, J.P. Morgan Workplace Solutions, talked about how education and advice on equity compensation-related matters can help companies to stand out from their competitors.

“Let’s remember the overall goals are to attract key talent, retain that key talent, and to inspire that key talent. Ultimately, we’re talking about helping a company maximize the ROI (return on investment) on their equity comp platform, and I think a great way to do that is to help all participants have a positive experience. They can have a positive experience through education and advice, and in the end that education and advice helps them maximize every dollar the company spends that will land in their pocket as well,” he said.

Ryan went on to offer an example around the rules on tax treatment of stock options.

“If you have an incentive stock option, that should receive preferential tax treatment, but unless that is explained you might just go into the market and sell it all at once. When you do that, it gets treated as a non-qualified stock option, nullifying the preferential tax treatment for long term capital gains. That’s something through advice and education we can try to avoid,” he said.

Ryan added that with regulatory changes being a common occurrence in recent times, businesses would be well-served to work with partners whose job is to be up to speed on the current rules at any given moment and can therefore help their people to get the most from their equity compensation.

“Ultimately, you wouldn’t want to hike Everest without a mountaineer guide, nor would you want to do any of these things without a financial professional and a tax professional helping you along the way, because if it’s done right, it can be very beneficial, both for the individual and the company,” he said.

Why some participants do not make full use of their plans

Jackson Vaught, Head of Reinvestment Strategy and Participant Engagement, J.P. Morgan Workplace Solutions, homed in on why sometimes participants don’t maximize the possibilities around their equity awards, identifying three key points:

• Opportunities for improved communications
• Unrecognized potential value
• Need for broader long-term planning

Jackson stressed that it is not easy to get equity compensation-related communications right at all times. “Equity plans can be very complex and are only becoming more complex in certain cases as the industry evolves. That being the case, ensuring that you’re communicating exactly what’s going on with a particular plan regularly and effectively is, frankly, a tough nut to crack that very few companies do very well,” he said.

Jackson linked the point around not fully understanding the possibilities to misplaced assumptions about existing levels of understanding. “People often make the mistake of assuming that just because someone is an executive and might have a higher wealth profile, they have a higher degree of financial acumen. I can assure you that that is not always the case. People don’t value what they don’t understand, and so if you’re not explaining it to them effectively, they’re not going to take advantage of it,” he said.

Pay transparency and equity compensation

The fourth panelist, Nancy Romanyshyn, Senior Director Total Rewards Strategy and Solutions at Syndio, flagged 2025 as the year in which pay transparency – the requirement for companies to be more open about compensation – is finally set to take center stage.

“I think about 2023 as the year when people were first realizing this was real. In 2024, I spoke with hundreds of total rewards leaders and depending upon their footprints, you could see everyone sort of grappling with how to operationalize it, with so many different demands across different jurisdictions. Now, in 2025, I think we’re going to see a year of taking action. People are starting to activate these plans,” she said.

While many parts of the United States have already or are expected to introduce their own rules, Nancy singled out the EU Pay Transparency Directive, which member states are obliged to implement by June 2026, as being the most demanding legislation seen to date.

“It is far reaching. If you are a US company with employees in the EU you’re going to have to do pay equity analysis. You’re going to have to have pay transparency and career transparency, as there’s a right to information component. And when we talk about pay, they’re interpreting pay to be very broad. It’s all forms of remuneration. So, it includes equity, it includes allowances, benefits. Basically, a huge wave of requirements is coming,” she said.

What next?

You can access the on-demand webinar here.
 

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