Along with the rest of the OptionTrax® team, I’m personally thrilled to announce our new Equity Inclusion Initiative, designed to support the growth of black-owned and women-owned businesses via funding the implementation and successful management of equity award programs.
Why do equity award programs matter?
2020 and 2021 have brought the issue of equality to the forefront in a way it hasn’t been for a generation. Despite this renewed dialogue, however, black-owned and women-owned businesses continue to be left behind. In 2019, only 2.8% of total VC funding was invested in women-owned businesses and less than 1% was invested in black-owned businesses. When this limited access to capital is combined with under-utilization of equity compensation, it hinders the ability of a business to scale and succeed. Equity awards are a powerful tool for driving business performance, and particularly for cash-strapped growth stage companies, the upside potential of equity can attract and retain top talent even with below-market salary offers.
This is one reason that equity awards are so popular in technology and biotech, where equity often makes up a greater percentage of employee compensation than salaries. In today’s pandemic environment, equity awards are also powerful stopgaps to provide value to employees when economic conditions require salary freezes, cuts or even staff furloughs.
Most important, evidence shows that stock options may increase the chance of success for younger companies by building a high-commitment work environment that drives culture, loyalty and performance. The payoff path is clear in companies on an IPO or acquisition track, and we’re increasingly seeing creative equity award plans with built-in redemption periods, tender offers, and even cryptocurrency exchanges, that also deliver value to employees of longer-term private companies. We believe that expanding the use of equity incentive plans in women-owned and black-owned businesses will contribute to the growth of these businesses and in turn drive job creation, build wealth, and support a more equitable economy.
What does the OptionTrax Equity Inclusion Initiative bring to the table?
By now, “regulars” in the equity management space have heard me speak about gender equity in equity compensation, a topic I’m personally passionate about. I’m involved with several women in entrepreneurship groups, and a partner of a law firm that works in the space once said to me “…we often recommend that founders delay implementing an equity award plan because it’s just so complicated to manage.” This conversation made me realize that we (OptionTrax) have something important to offer. It’s true that equity award plans come with complicated tax, accounting and disclosure requirements, but the positive impact of equity awards on a company and its employees need not be outweighed by the cost and effort to manage the program.
In addition to the capital gap, there is a technology use gap for women-owned and black-owned businesses. Without the right technology, businesses are passing up an incredible performance tool in equity, in order to avoid the potential risk and administrative burden involved.
The OptionTrax Equity Inclusion Initiative aims to facilitate broader use of equity incentive plans by offering pro bono equity management tools and services to 25 private or public women-owned and/ or black-owned business for eighteen months. Our goal is to work with revenue-stage businesses that see equity management and compensation as an important part of their current stage of development.
Successful applicants will receive an equity plan best practice consultation and use of the OptionTrax equity management platform, which provides full equity plan and cap table management functionality with integrated financial reporting, tax calculations and growth modeling. With the OptionTrax employee portal, companies will be able to engage and communicate with their employees about their equity in order to further drive commitment and performance. Intuitive, and designed for growth-stage enterprises, the OptionTrax system is the only tool a company needs to implement and manage an effective equity program.
Our hope is that access to the robust management and reporting tools in OptionTrax will help to both grow businesses and lead to more equitable distribution of equity. Our own study of OptionTrax client data revealed that on average, women received fifty percent of the number of equity awards received by men at the same organization. Access to simplified and flexible reporting makes it easier to see the big picture and to identify trends that indicate bias (conscious or subconscious) in the equity granting process.
We recognize that achieving societal and economic equality will require the inclusion of marginalized groups beyond women and blacks, and broad-reaching efforts across many institutions and systems. With this initiative we hope to contribute by supporting the growth of some of the incredible businesses that are under-served and under-recognized.
If you’re interested in learning more, or would like to apply, please visit https://www.optiontrax.com/equity-inclusion-initiative.
Sincerely,
Elena Thomas
COO
Plan Management | OptionTrax