Korryn works at a convenience store. When she was hired, she would work 40 hours per week and receive $15 per hour of work. The company also gives all employees partial ownership in the form of shares. Which form of compensation does Korryn receive for her work?

• A. Hourly
• B. Equity
• C. Salary
• D. Piece work

Answer: (B)

Equity compensation means getting an ownership stake in the company, typically through shares. In this situation, Korryn does earn cash by working 40 hours a week at $15 per hour, but the employer also grants all employees ownership in the form of shares. That ownership component is equity compensation, because it gives her a claim to part of the company’s future value beyond the cash wages. It isn’t hourly pay, salary, or piece work, which are different ways to compensate for work. The key idea is that the ownership via shares is what defines equity compensation.