Stock Options… for All?

This is one of Korn Ferry's Under the Radar trends for 2025. You can read about all these trends here. 

“Equity compensation” has long been a phrase that inherently refers to executives: It’s standard practice for leaders to receive compensation packages dominated by equity, while rank-and-file employees are paid predominantly in cash, sometimes with access to limited stock options.

But as the New Year approaches, experts are calling attention to a little-noticed but important shift. A recent report by the Conference Board predicts 6% growth in equity compensation in 2025, and experts believe a wider range of workers will be included. What they don’t know: how well that might be received.

Executives at high levels are familiar with the opportunities and risks stock compensation offers: A rise or fall in the firm’s stock will lead, respectively, to an increase or decrease in compensation. “There’s a risk—employees could end up making less,” says David Wise, vice chairman of the Rewards practice at Korn Ferry.

To be sure, firms have long used equity as a compensation incentive via one of two paths: Some shares are distributed to leaders by tier, with each successive tier earning more. Others are allocated to broader groups of employees—often to high performers  and high potential employees for their successes, says Todd McGovern, global leader of the Total Rewards practice at Korn Ferry—when the board delegates the appropriate authority to the CEO.

This push to tie performance to compensation fuels much of the current attraction of equity compensation. In all, firms are expected to grow so-called “recognition” programs by 14%. This is alluring to firms that want to operate nimbly and innovate. “When successes are achieved in an agile environment, you want rewards to be more contemporaneous,” says McGovern, who expects CEO-granted shares to continue growing at companies.

Companies find equity compensation attractive for other reasons in this economic cycle. When employees are paid with cash, that compensation, which is subtracted from corporate revenues, lowers reported adjusted earnings. But equity compensation is accounted for in a way that can lower compensation layout. “Businesses struggling with earnings are likely to use equity more, sometimes in lieu of cash,” says Wise.

At the same time, companies are looking to create an ownership culture that gives employees a stake in the business. “If you pay employees cash, they are assets that walk out the door—there’s nothing keeping them there,” says McGovern. Stock typically vests over a handful of years, incentivizing employees to stay put and help the stock value grow.

For more information, see Korn Ferry's Talent Acquisition Trends 2025 report.