Case 1: Thanks, but We'd Rather Have Cash HR Oops!

High-tech giants like Apple and Twitter make the news when they announce they will be awarding stock to employees. With the stock prices of such companies soaring, it's easy for employees to see that these awards have value. But smaller companies find the benefits of this kind of incentive pay to be a little more complicated. Consider Zayo Group Holdings, a maker of Internet infrastructure. It began giving restricted stock to all its employees, including call center staff and administrative assistants. The value of the stock for a tech support worker in a call center equaled about 10% of the employee's total pay. But management soon realized that some employees didn't understand what they were getting. The stock was "restricted," so they couldn't sell it for cash until it "vested," and they didn't know what that meant. They wondered how they could pay all their bills when part of their income was in a form they couldn't spend. Add in the fact that stock prices are variable, and employees started to wonder if they would ever actually see any money from the stock grants. Indeed, stock grants are harder to understand than a paycheck. For example, if the stock award is restricted stock units, such as Zayo Group awarded, the value of the stock is taxed as income at the time employees receive it. If the company gives employees stock options, these are taxed as income if and when the employee exercises the option to sell the stock. And employees have to know how to get the most value from the stock: deciding when and whether to exercise stock options or what to do with a stock granthang on to it or sell it and invest the proceeds. Zayo Group addressed the pitfalls of its stock grants by teaching its employees about stock and its potential to grow in value. Proper training and access to investment advice can help make this form of compensation live up to its potential as incentive pay. Other employers, notably Google, test employees' reactions to various kinds of incentives. Google tried giving large grants of stock to top performing employees, but instead of energizing employees, the program raised doubts that some employees would ever have a chance to earn the awards. The company found that a more effective incentive was a program in which more employees had a chance to earn rewards that delivered experiences, such as dinners or trips.

Questions

1. If you had a chance to earn a $1,000 cash bonus or $1,000 worth of stock in the company you work for, which would you choose? Why?
2. Is it a mistake for a company to give employees an award of restricted stock without also training them to understand stocks and investing? Why or why not?