Carrot Equity

You've heard the phrase "dangle the carrot" or "carrot and the stick" right? How about "sticks and stones will break my bones?" That last one has nothing to do with this definition...we just got nostalgic for grade school for a minute. The carrot/stick expressions speak directly to the phrase "carrot equity" though. It's equity in the business being granted to employees based on performance (if the employee reaches the dangling carrot, so to speak).

So say you work for a company that will give you stock options or shares, if you hit a certain financial milestone or goal. Those shares are your carrot equity. Companies can do this instead of (or in addition to) cash bonuses. Often, this is done by small companies, or very young companies, because they may not have cash on hand to give a bonus, and they especially want employees to feel invested in the company.