Definition of equity compensation


Equity compensation is the practice of granting equity in exchange for work.

Related terms

More from The Holloway Guide to Equity Compensation

Equity Compensation Basics β€Ί Compensation and Equity

In this Guide we focus on equity compensation in stock corporations, the kind of company where ownership is represented by stock. (We describe stock in more detail in the next section.) Equity compensation in the form of a direct grant of stock with no strings attached is very rare. Instead, employees are given stock with additional restrictions placed on it, or are given contractual rights that later can lead to owning stock. These forms of equity compensation include restricted stock, stock options, and restricted stock units, each of which we’ll describe in detail.

The Goals of Equity Compensation