Equity Incentives to Reduce Turnover

Options and other similar compensation instruments also have a role to play well beyond the initial transaction; in addition to being offered to new hires brought on after investment, these compensation schemes can also be used to help retain existing talent that may be at risk of leaving for another position or retiring (e.g., giving a CEO more options on top of his existing grant to keep him from leaving for a competitor or giving additional options to a VP of Finance who is being promoted to CFO). In fact, research from Morgan Stanley has shown that even amongst companies considered to have a “high employee empowerment” culture, those with generous equity incentive programs had less than half the turnover of those with no equity incentive programs at all (6.3% v. 14.4% voluntary annual turnover).