Equity inequity: What is it, and why does it matter for your business?

Employee compensation can be a complicated and multi-faceted puzzle. Even if a business has found a balance between profitability and employee satisfaction in salaries, they may have no idea how to approach stock awards. How many shares should a company grant its employees and how often? There are plenty of guides that break down the numbers of valuing startup equity, but what is often absent from these conversations is the need to ensure that employees doing the same job for the same period of time are receiving similar compensation. 

It’s understandable why this is so often ignored: tracking and analyzing data like this is difficult, and creating a report that is both easy to read and able to be translated into meaningful change is a time-consuming endeavor. Equity management software can significantly ease this process, though many platforms on the market today simply aren’t built to support it. But ignoring this inequity can have a negative impact on your business’s image and the lives of your employees. 

What’s at stake

Startup employees have started to raise the alarm that their employers are not monitoring grants across employee demographics, like race and gender. They found that employees who were doing the same job, for the same base pay, with the same company history were receiving widely disproportionate grants. In many cases, these inequities do not see the light of day until the companies go public and file their IPO prospectus, which can be incredibly damaging. 

Not knowing there’s an issue is not the same as not having an issue. It’s critical that companies have visibility into how equity is distributed across their workforce to ensure employees across all demographics are being compensated appropriately.

It’s understandable. Early-stage companies are expected to move incredibly fast, and adding another complicated data set to monitor can be daunting. But the longer you wait to address how equity is distributed throughout your workforce, the sooner your grant amounts, vesting practices, and grant values could become a real problem for your company.

Addressing inequities in employee compensation 

So, how exactly can your company find grant discrepancies across your workforce? Generally, a compensation consultant would be hired to crunch these numbers and interpret the data, providing you with their results a few months later. But this is a big expense, especially for startups, and many businesses want to be able to access this data regularly, not rely on slow, one-off services. 

Software that can take your company’s ownership data and organize it into an easy-to-read report is one of the most immediate and cost-effective ways to identify equity inequity. Unfortunately, most equity management software platforms don’t offer this functionality. The ones that do can help your business take the first step in addressing compensation inequity: seeing the problem to begin with.

Get the visibility you need

Astrella helps you easily upload the demographic information for your company. Then, with the click of a button, you can run a Pay Comparison Report that shows awards by person, work history, gender, ethnicity, and variance from the mean. It’s the first step in making sure all your employees across demographics are valued and fairly compensated for their contributions to your business.

To see Astrella’s Pay Comparison Report in action, visit astrella.com or request a free demo.

President of EQ PCS at | + posts

I am the head of EQ Private Company Solutions - a comprehensive Ownership Management solution to guide and support a private company through the ownership journey through an intuitive UI and cutting edge technology platform.  Equipped with a wealth of knowledge and expertise, I specialize in defining go-to-market strategies, enhancing product offerings and user experiences, and ultimately driving revenue growth.