Summary
This report explores access to equity compensation and capital shares in the tech sector, which merits special attention for the following two reasons.
First, the tech industry is heavily supported by the federal government. Every year the federal government spends billions of dollars to support private-sector tech firms. This includes government-backed venture capital loans; grants and technical assistance for small businesses; and patented government technologies provided to emerging companies at no upfront cost. Moreover, this federal funding and support often comes in a company’s early stages, when private-sector investment is usually difficult to obtain.
Second, outside industries often emulate the innovative culture and practices of the technology sector. In this way, it is likely that policies that increase the uptake of broad-based equity compensation and stock ownership among tech companies would provide beneficial effects for workers throughout the economy.
For this reason, CAP recommends that whenever the federal government provides at least $1 million in government assistance to tech startups, recipients should be required to share equity, profits, or ownership with all their workers when they go public or sell to another company.
In order to advance support for this policy, this report provides background on the history of broad-based equity compensation and employee ownership in the tech industry, as well as government financial support for tech startups. It also details the policy’s structure.
While the report focuses primarily on federal reforms, state and local governments also provide significant support for tech startups through economic development assistance and university partnerships. Consequently, state and local lawmakers have opportunities to undertake similar reforms.