Equity, often referred to as shareholder equity or in the case of a private company, owner’s equity, represents the value returned to shareholders once all assets are liquidated and all debt paid. The term equity is commonly used as shorthand for a person’s ownership interest or shareholdings in a company.

Equity earning opportunities can play a crucial role in executive and employee compensation packages, often demonstrated through shareholder programs or directly providing an equity stake in the company. These compensation strategies often incorporate short- and long-term incentive programs that include options, shares or in the case of long-term incentive programs, restricted share units, performance share units and/or deferred share units. The eligibility criteria and rules governing the shareholder programs are frequently set out in offers of employment and company policy documents. The means by which shares are to be valued can also be set out in the company’s shareholder agreement.