Equity Grant Policy

An equity grant policy is the documented framework for granting equity to employees. It covers grant size by role and level, refresh grants, acceleration provisions, vesting schedule, and consistent application across hires, providing both fairness (similar roles get similar grants) and predictability (managers know what to offer) that case-by-case grant decisions lack. It is the operational discipline that distinguishes companies that grant equity systematically from companies that negotiate every grant individually.

The components:

Grant size by role and level:

• Engineering: IC1 (entry) → IC2 → IC3 (senior) → IC4 (staff) → IC5 (principal) with BPS ranges per level.
• Sales: SDR → AE → Senior AE → Sales Manager → VP with BPS ranges.
• Cross-functional: PM, marketing, customer success, operations with their own ladders.

Refresh policies:

• Annual refresh grants (typical 25-50% of original grant).
• Performance-tied refresh (high performers get larger; lower performers smaller or none).
• Promotion-triggered refresh (additional grants at level transitions).

Acceleration provisions:

• Double-trigger acceleration on change of control + termination.
• Standard 100% acceleration for senior roles; less for junior.
• "Good reason" definition for executives.

Vesting schedule:

• Standard: 4-year with 1-year cliff.
• Sometimes 25% acceleration at certain milestones.
• Founders may have different structure (e.g., immediate vesting credit for pre-formation work).

Other policy elements:

• Post-termination exercise window (typical 90 days; extended PTEW at some companies).
• Early exercise availability (typically allowed for founders and senior employees).
• Equity grant timing (typical first business day of month after start date).

Why systematic policies matter:

Fairness: similar roles get similar grants regardless of negotiation skill.

Predictability: managers know what to offer; candidates know what to expect.

Capital planning: option pool consumption is predictable.

Compensation philosophy alignment: equity grants align with company's overall comp philosophy.

Common policy failures:

No documented policy: every grant is bespoke. Inconsistency and pay equity issues.

Policy not followed: documented but bypassed in negotiations.

No refresh policy: tenured employees vest out and have no incentive to stay.

Inconsistent acceleration: some senior hires get acceleration, others don't, based on negotiation rather than role.

What founders get wrong: Operating without a documented equity grant policy, leading to inconsistency and pay equity issues over time. The right discipline: document the policy by Series A/B, apply consistently, refresh annually.

Related: Option Pool · Equity Refresh · Employee Equity · Compensation Philosophy · Vesting

FAQ

What is an equity grant policy?
The documented framework for granting equity to employees, covering grant size by role/level, refresh policies, acceleration provisions, vesting schedule, and consistent application across hires. Provides fairness and predictability that case-by-case grants lack.

What should be in an equity grant policy?
Grant size by role and level (BPS ranges per job family and seniority), refresh policies (annual percentage or performance-tied), acceleration provisions (single/double-trigger and percentages), vesting schedule, post-termination exercise window, early exercise availability.

When should companies develop an equity grant policy?
By Series A or B when hiring is happening regularly enough that case-by-case grants create inconsistency. Even at small scale (10-20 employees), a documented policy prevents pay equity issues from emerging. By growth stage, formal policy is operational requirement.