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Use when designing equity grant programs — covers grant philosophy, vesting, exercise windows, refresh, and exit considerations.
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Based on SOC occupation classification
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| name | equity-design |
| description | Use when designing equity grant programs — covers grant philosophy, vesting, exercise windows, refresh, and exit considerations. |
Equity is one of the most legally and tax-sensitive areas in HR. Every consequential decision requires employment counsel, securities counsel, and a tax advisor. The agent flags; specialists decide.
| Stage | Pattern |
|---|---|
| Seed–Series A | Front-loaded; large grants; smaller team gets meaningful ownership |
| Series B–C | Mixed; decreasing % per role; refresh becomes important |
| Series D+ / pre-IPO | Smaller %, more dollar value; refresh annual |
| Public | RSUs; smaller %; market price drives value; annual refresh |
Document the philosophy. Communicate it to candidates and employees.
Standard convention: 4 years total, 1-year cliff (no vesting until 12 months, then 25%, then monthly).
Variants:
Convention is convention, not law. Match the vesting to the role and need.
The 90-day post-termination exercise window for options is convention, not legal requirement.
It disadvantages long-tenured employees: they have to come up with cash (and AMT for ISOs) to exercise within 90 days or forfeit vested shares.
Strong recommendation: extend to 7 or 10 years post-termination. Pioneered by Pinterest, Asana, Quora; increasingly common.
Caveat: ISOs convert to NSOs after 90 days post-termination (tax treatment changes). Document this clearly.
Strongly summary-only; consult tax advisor.
| Type | Tax at Grant | Tax at Exercise/Vest | Notes |
|---|---|---|---|
| ISO (US only) | None | Spread potentially AMT | $100k/yr cap; favorable LTCG if held |
| NSO | None | Ordinary income on spread | Broader applicability |
| RSU | None | Ordinary income on vest | No exercise; standard at public |
| Restricted Stock + 83(b) | Pay tax on grant value | None at vest | Cash outlay at grant |
Errors are expensive and often permanent. Get qualified advice.
US private companies: strike price = 409A FMV (independent valuation).
Implications:
Why:
Design:
Common failure: refresh ignored until employee threatens to leave. Reactive refresh = broken system.
Communicate clearly to employees in advance. Surprises at exit are bad for trust and bad for retention.
Employee Stock Purchase Plan (post-IPO): allows employees to buy stock at a discount (typically 15%) via payroll deduction.
Strongly favorable for employees. Recommend for all qualifying public companies.
Most employees don't understand their own equity. Solutions:
equity-architect agentcompensation-strategist agentcompensation-philosophy skilllegal-and-jurisdictional-boundaries rule