The Shift from Stock Options to RSUs
The most consequential structural change in equity compensation has been the near-complete replacement of stock options by restricted stock units. In 2000, virtually every public company granted stock options and only about 20% offered full-value awards like restricted stock. By 2024, those numbers had inverted: 95% of public companies now grant RSUs, while stock option usage has fallen to roughly 40%, according to the NASPP/Deloitte Equity Incentives Design Survey.
This shift was catalyzed by two forces. First, FAS 123(R) (now ASC 718), adopted in 2004 and effective in 2006, eliminated the accounting advantage of at-the-money stock options by requiring all equity awards to be expensed at fair value. Once options and RSUs carried the same P&L impact, companies migrated to RSUs for their simplicity, easier valuation, and guaranteed value to employees (options can expire worthless; RSUs retain value as long as the stock is above zero). Second, the post-2008 environment of heightened governance scrutiny made RSUs (which are easier for shareholders to value and for compensation committees to benchmark) the politically safer choice.
Tech and life sciences sectors led the transition and remain the most aggressive users of broad-based equity. According to the 2024 NASPP/Deloitte survey, 94% of tech companies grant RSUs to middle management, 84% to junior management, and nearly 60% to their general (non-exempt) workforce.
Industry Concentration: A Tech-Driven Phenomenon
While equity compensation is widespread, its dollar value is overwhelmingly concentrated in a handful of sectors. In the Russell 3000, information technology companies spent 4.0% of aggregate revenue on SBC in 2022, roughly six times the median across all sectors. Communication services matched at 4.0%. By contrast, utilities and consumer staples spent less than 0.5% of revenue. At the company level, the top 10 SBC spenders in the S&P 500 (dominated by names like Alphabet, Apple, Amazon, Meta, and Goldman Sachs) routinely account for a double-digit share of total index-wide SBC.
This concentration has significant implications for household wealth. For employees at high-growth tech firms, RSU grants can represent 30–60% or more of total compensation. A senior engineer at a major tech company might receive $150,000–$400,000 annually in RSUs, making equity comp the dominant asset accumulation vehicle outside of real estate. For the wealth-building audience, this creates a distinctive financial planning challenge: managing concentrated single-stock exposure while maximizing the wealth-building potential of what is essentially a forced savings program.
Who Gets Equity: Broadening Access, Persistent Gaps
An estimated 14 million U.S. employees participate in some form of equity compensation plan, including stock options, RSUs, restricted stock, and employee stock purchase plans. That figure represents roughly 9% of the private-sector workforce. About 92% of public companies now offer equity below the senior executive level, a significant expansion from the options-era norm where equity was largely confined to executives and a handful of senior technical staff.
However, depth of coverage remains uneven. While nearly all public companies offer equity to middle and senior management, only about 63% extend awards to the general workforce (hourly or non-exempt employees). The value gap is even starker. In the Russell 3000, median CEO total compensation reached $6.7 million in 2024, with equity awards comprising the dominant share. For the average non-executive recipient, annual grant values are typically in the $5,000–$30,000 range, meaningful as a supplement, but modest as a primary wealth-building vehicle.
The ESOP universe provides a different path to employee ownership. As of 2023, 6,609 ESOPs covered 15.1 million participants (10.9 million active) and held $2.06 trillion in total assets. ESOP participants tend to have retirement balances roughly double those of comparable non-ESOP workers, according to NCEO research.
The SBC-to-Revenue Ratio: A Metric Worth Watching
For investors and financial planners alike, the ratio of stock-based compensation to revenue is one of the most telling metrics in corporate finance. For the Russell 3000 in aggregate, SBC went from 0.2% of sales in 2006 to 1.3% in 2022 and an estimated 1.4% in 2024. That aggregate masks enormous variation: at the company level, SBC can exceed 20–30% of revenue for high-growth software firms, while mature industrials may be under 0.5%.
Research from Nixon Capital found that Russell 3000 companies in the top decile of SBC-to-operating-expense ratio underperformed the index in 9 of 12 years from 2010 to 2022, generating 5.8% annualized returns versus 11.9% for the index. The implication: excessive equity dilution can be a meaningful drag on shareholder returns, which in turn affects the realized value of RSU grants held by employees.
For households with significant RSU wealth, this creates a feedback loop. The same companies that pay the most in equity compensation are often those with the highest SBC-to-revenue ratios, which research suggests may correlate with lower long-term stock performance. This underscores the importance of diversification planning for concentrated equity positions.
RSUs and Tax Planning Complexity
Unlike stock options, which create a taxable event only at exercise (or, for ISOs, potentially at sale), RSUs are taxed as ordinary income upon vesting. For employees receiving large RSU grants, this creates predictable but sometimes substantial tax liabilities: a $200,000 RSU vest at a combined federal and state marginal rate of 45–50% generates $90,000–$100,000 in immediate tax. Most companies withhold shares to cover the tax, but the default withholding rate (often 22% federal supplemental) frequently underpays, leaving employees with a balance due at tax time.
For the $500K+ net worth segment, RSU tax planning intersects with capital gains management, estimated tax payments, and charitable giving strategies. Techniques like donating appreciated vested shares (which avoids the capital gains on post-vest appreciation while providing a fair-market-value deduction) or structuring 10b5-1 plans for systematic diversification are increasingly part of the high-net-worth equity compensation playbook.
Looking Forward
Several forces suggest equity compensation will continue growing as a share of total employee pay. The ongoing competition for technical talent, the expansion of equity grants to broader employee populations, and the structural preference of growth-stage companies for equity over cash all point in the same direction. The rise of performance-based stock units (PSUs) (now used by 69% of Russell 3000 and 93% of S&P 500 companies) adds another layer of complexity but also potentially aligns employee and shareholder interests more closely.
For households accumulating wealth through equity compensation, the key challenge remains concentration risk. The typical RSU recipient’s equity wealth is tied to a single stock, subject to both company-specific and market risk. The gap between the paper value of unvested grants and their after-tax, after-diversification realized value is often larger than recipients appreciate. Understanding that gap (and planning around it) is increasingly central to the financial planning conversation for America’s growing equity compensation class.
From $25 Billion to $330 Billion in Under Two Decades
Stock-based compensation has undergone a dramatic transformation since 2006, when FASB required companies to expense equity awards on their income statements for the first time. That year, Russell 3000 companies reported roughly $25 billion in total SBC expense. By 2022, that figure had surged to approximately $270 billion (a more than tenfold increase) and is estimated to have exceeded $330 billion in 2024. Over the same period, aggregate revenue for the Russell 3000 roughly doubled from $11.5 trillion to over $23 trillion, meaning SBC grew at roughly five times the rate of underlying sales.
The acceleration was particularly sharp after 2018, when the Tax Cuts and Jobs Act capped the Section 162(m) deduction limit at $1 million for all named executive officers and eliminated the performance-based exemption. Paradoxically, this made equity compensation more attractive relative to cash in many structures, and total SBC expense nearly doubled from $135 billion in 2018 to $270 billion in 2022.