What is equity compensation?

Pay delivered as company shares or rights to shares rather than cash. Common forms: stock options, RSUs, restricted stock, ESPPs. Used heavily in startups to align employees with long-term company outcomes.

Stock options vs RSUs — which is better?

Options work best early (low strike price = high upside if company grows). RSUs work better at scale (actual shares regardless of price). Most companies start with options pre-IPO and shift to RSUs once liquid.

Is equity worth more than cash?

Sometimes — but it's also worth zero more often than founders admit. Most startup equity ends up worthless because most startups don't reach successful exits. Treat equity as an upside lottery ticket, not a salary replacement.

Can Georgian startups offer equity?

Yes, but typically via offshore parent companies (e.g., Delaware C-corp). The Georgian Labor Code does not have a developed equity-comp framework; most Georgian startups planning international fundraising incorporate the parent abroad early.

HR GLOSSARY · Compensation & payroll

Equity compensation

Also known as: Stock options, RSU, Restricted stock units, Share-based compensation

Equity compensation is pay delivered as company shares (or rights to shares) rather than cash. The most common forms in modern companies are stock options (right to buy at a fixed price), RSUs (restricted stock units, granted directly), and ESPPs (employee stock purchase plans). Used heavily in startups and tech companies to align employees with long-term company outcomes.

Equity is the part of pay tied to the company's future, not its current cash position. For startups, it lets you offer compensation packages that fit the founder's cash constraints while still attracting talent. For employees, it offers upside if the company succeeds. The trade-off is real: equity might be worth zero if the company fails, and even successful equity often carries tax surprises that cash compensation does not.

Common equity instruments

Stock options (ISOs / NSOs in the US) — right to buy company shares at a fixed "strike" price after vesting
RSUs (Restricted Stock Units) — units that convert to actual shares on vesting, no purchase required
Restricted stock (early-stage) — actual shares granted upfront, subject to vesting forfeiture
ESPPs (Employee Stock Purchase Plans) — payroll-deduction purchases of company shares at a discount
Phantom equity / SARs — cash payments tied to share value, no actual share ownership

Options vs RSUs — when each fits

Stock options work best early — when the share price is low, options at that strike price can become very valuable if the company grows. They're less useful at scale: a $50 strike option in a $52 stock company isn't exciting. RSUs work better at scale — you receive actual shares regardless of how high the price is now. Most companies start with options pre-IPO and shift to RSUs (or a mix) once liquid.

Frequently asked questions

What is equity compensation?: Pay delivered as company shares or rights to shares rather than cash. Common forms: stock options, RSUs, restricted stock, ESPPs. Used heavily in startups to align employees with long-term company outcomes.
Stock options vs RSUs — which is better?: Options work best early (low strike price = high upside if company grows). RSUs work better at scale (actual shares regardless of price). Most companies start with options pre-IPO and shift to RSUs once liquid.
Is equity worth more than cash?: Sometimes — but it's also worth zero more often than founders admit. Most startup equity ends up worthless because most startups don't reach successful exits. Treat equity as an upside lottery ticket, not a salary replacement.
Can Georgian startups offer equity?: Yes, but typically via offshore parent companies (e.g., Delaware C-corp). The Georgian Labor Code does not have a developed equity-comp framework; most Georgian startups planning international fundraising incorporate the parent abroad early.