The Practitioner's Playbook: Six Things to Take Back to Your Equity Plan

Article 1 in this series covered six myths about share plans that surface regularly and rarely get challenged openly. This one covers the other side of the same conversation: what David Edwards and Nigel Watson actually think good looks like in practice. Six things worth taking back to your own plan.

1. Start with the belief contract.

Before the instrument, before the tax wrapper, before the vesting schedule, there is a more fundamental question: what are you asking people to believe in?

Nigel Watson has written about what he calls the belief contract. The idea is that a founder isn't primarily selling equity. They're selling belief. The equity proposition is almost incidental to that story, because what the founder is really asking is: do you believe in me, in this company, in where we're going? The equity is the expression of that belief, not the reason for it.

This applies beyond early-stage companies. Any organisation asking employees to participate in a share plan is asking them to hold a view about the future. What will this company look like in three years? Is the leadership credible? Does the plan reflect genuine commitment, or is it a retention mechanism dressed up as something more?

The practical implication is that plan design should start with that question, not with the instrument. What is the story we're asking people to believe? Is it honest? Is it one we can sustain when things get difficult? The answers shape everything else: the structure, the communication, the vesting timeline, the governance.

2. Resist the spaghetti junction.

Complexity in share plans rarely arrives all at once. It comes in one client request at a time.

Nigel's description of how it happens is precise: a client says they want a particular feature, then an exception, then a discretion, then a piece of the waterfall, then a liquidity preference. Each request is individually reasonable. Collectively, they produce what he calls a spaghetti junction: an arrangement so layered that nobody can navigate it cleanly, and the participant on the receiving end has no chance of understanding what they actually hold.

The solution isn't technical. It's candour. Nigel is direct about what that looks like in practice: "I'm old enough and ugly enough now to have very blunt conversations with people. Do you really want that? Are you sure? By the way, I've seen this play out badly eight times."

Two things help before you get to that point. The first is a proper term sheet: getting the structure mapped out in advance, before the layers accumulate. The second is what Nigel describes as being a genuine co-rider to the client on the journey, not just a technical drafter. In a world where any answer is available at the click of a button, the value of the advisor who pushes back, who asks the question nobody wants to answer, is only going up.

3. Build for comprehension, not just communication.

David Edwards is candid about the limits of even well-resourced comms programmes. NatWest, by his own assessment, has upper-quartile share plan communications. Multiple channels, simplified language, regular touchpoints, evolving formats. And still, employees contact the team not knowing that their SAYE savings are returned if the option expires underwater, believing they have lost their money.

That is not a comms failure in the conventional sense. The information is there. The failure is comprehension.

The distinction matters because it changes what you invest in. More volume, more collateral, more emails, won't close the comprehension gap. What does close it, at least partly, is colleague advocacy. David is clear that peer-to-peer communication is the most powerful channel available: the person sitting next to an employee, or who they get coffee with, carries more credibility than any internal communication however well designed. Identifying champions across the organisation and giving them the knowledge and confidence to answer questions is a higher-leverage investment than most teams realise.

Town halls help too, and not just for the information they carry. Nigel's observation is that the value of a town hall is partly the buzz and trust it creates: people hear other people's questions, they see that honest answers are possible, and the background cynicism that accumulates in silence starts to dissipate. Internal social channels, used well, create a public record of questions and answers that reduces the volume of repeat queries and signals that no question is a bad one.

David puts the philosophy simply: he would rather employees surface questions, however basic, than sit in silence not knowing. Every question is a sign of engagement. That is the right way to think about comprehension.

4. Take concentration risk seriously.

Equity plans create concentrated positions. A participant who has been in a plan for several years, in a company whose stock has performed well, may have a significant portion of their net worth sitting in a single stock. That is a material financial risk, and most organisations do not address it directly.

The hesitation is understandable. Employers worry about straying into financial advice. Regulators draw lines around guidance. It feels safer to say nothing than to say the wrong thing.

David Edwards's view is that this caution, while legitimate, has been overextended. NatWest segments its workforce and identifies employees who are likely to be over-concentrated. It proactively sends articles and signposts independent financial advisors. The message is not "sell your shares." It is: if you have a large multiple of salary sitting in a single stock, an independent financial advisor is quite likely to suggest you think about diversification. That is information, not advice, and it is the employer's responsibility to provide it.

There is also a harder observation about consistency. David points to the dissonance of an employer who won't have a candid conversation about share plan risk while employees in the same organisation are actively trading cryptocurrency on their phones. The reluctance to engage with risk isn't protecting employees from something they don't understand. It's withholding context from people who are clearly comfortable making financial decisions.

Delivering that information doesn't have to be formal. The goal is what David describes as powerfully promoting the right amount of information, delivered in a clear and accessible way. Interesting and engaging, not compliance-driven and defensive.

5. Have a downturn playbook.

Share prices go down. Markets turn. External shocks happen. The question is not whether your plan will face a difficult period but whether you have decided in advance what you will do when it does.

David's reflection on NatWest's own experience is instructive. He joined the bank not long after the 2008 financial crisis, when the share price was at roughly 20p. Working through that period shaped how NatWest communicates about equity today. If a similar event happened now, his view is that organisations would handle it differently: "the levels of paternalism and engagement would be higher. I think people would own it more. The business would kick into gear and have a more blunt conversation with everybody about what it means."

That is an aspiration as much as a prediction. But it points to something practical: companies that communicate openly in good times have permission to communicate in difficult ones. If equity has been a regular, honest part of the internal conversation, a difficult quarter does not come as a shock. If it has been avoided or treated as a once-a-year compliance exercise, the silence at the moment of stress is deafening.

Nigel adds a structural point: where there is an external cause for a price drop, one that has nothing to do with the company's own performance, management has an opportunity to step in and own the narrative. The business is solid. Nothing has changed except the external environment. Keep your discipline. That kind of communication, delivered clearly and promptly, can be genuinely reassuring.

There is also a practical toolkit worth having ready: targeted retention payments, make-good mechanisms, repricing considerations. Not as automatic responses, but as options that have been thought through before they are needed.

6. Run an equity integrity audit.

Both David and Nigel, independently, arrive at the same practical recommendation when asked what one thing a company could do to improve its equity plan: audit it.

Nigel's version is what he calls an equity integrity audit. Most organisations review their plans, but they tend to focus on what was agreed at the start rather than what has actually happened since. Something always changes. The operating model drifts. A feature that made sense at launch no longer fits the organisation. The governance that looked robust on paper has gaps in practice. An annual review that specifically asks "does what we designed still match what we're doing, and does what we're doing still serve participants well?" is a different kind of exercise from a standard policy review.

David's framing is complementary: inspect what you expect. His point is that what you think is happening inside your plan, how well communications are landing, how easy it is to interact with the administrator, how engaged participants actually are, is likely to be quite different from what is actually happening. Some areas you will be overoptimistic about. Others, you may be underestimating. A genuine listening exercise, one that goes beyond satisfaction surveys to honest, qualitative feedback, surfaces the gap.

The principle is simple: mark your own work. Neither David nor Nigel thinks the industry does this enough.

The harder conversations, earlier.

Six things that are easier to agree with than to do. But as the conversation at Teuchters Bar made clear, the organisations that build equity plans that last are usually the ones that have had the harder conversations, earlier, about what the plan is really for and who it is really serving.

The first article in this series covers six myths about share plans worth questioning before they become policy.

To hear the full conversation, listen to the Stock 'N Roll podcast episode. If you're ready to put any of this into practice, get in touch with the experts at Optio Incentives today.

"Please note: This podcast content is for informational purposes only and is not intended as professional advice. Always consult qualified legal, tax, and financial advisors for guidance specific to your situation."

Stay tuned for more episodes of  Stock 'N Roll as we continue exploring the world of equity compensation: from theory to practice.