The New Rich: The Compensation Turning Employees into Millionaires
Until a few years ago, compensation in the form of stock options was almost exclusively the preserve of employees at local high-tech companies. Workers in more “traditional” sectors of the economy watched enviously as their friends employed by technology firms grew rich from options whose value soared. In recent times, however, the script has changed, and in the shadow of the stock market rally, more and more workers in the old economy are benefiting from stock option grants, from real estate to finance and industry. ● Living on unemployment benefits of 13,000 shekels: Behind the turmoil in high-tech ● Elbit employees got rich, Check Point took a hit: The options picture is revealed
One of the new option-granting companies is the development and construction firm Tidhar, which recently completed an initial public offering on the local stock exchange (IPO) at a valuation of 7.9 billion shekels, post-money. Last month it became clear that Tidhar, which operates in fields traditionally not associated with equity compensation, had granted options over the past two years to a number of employees, estimated in the dozens, some of whom will be able to begin exercising them already after the IPO. All of the options are already “in the money”, meaning the exercise price is lower than the market price of the company’s shares, and their total value is estimated at about 190 million shekels. As noted, Tidhar is part of a series of public and private companies in traditional sectors that have adopted in recent years the compensation method that until a few years ago was used only among technology company employees. This raises the question, how did options become a common word even in the corridors of local real estate, industry and commerce companies?
“It creates a feeling of FOMO”
Granting employees options gives them a future right to buy company shares at a predetermined price, the exercise price. It is a tool designed to align employee compensation with the future performance of the company and its stock. “This is a trend we have been seeing very clearly over the past two to three years,” says Keren Kibovitz, owner of the financial consulting firm Kibovitz & Co. “The issue of equity compensation is expanding not only to other industries, but also to additional layers within the companies themselves, which are involving more employees in compensation. Today, we see not only high-tech companies, but also services, commerce, finance and real estate companies granting options to employees, and not just to managers.”
Kibovitz attributes part of the phenomenon to the sharp price increases, sometimes by hundreds of percent, seen in shares traded on the Tel Aviv Stock Exchange over the past two years. “There has been a sharp rise in share prices in certain sectors. Sometimes the shares rose four or five times, and this creates a feeling of FOMO, fear of missing out, among salaried workers. They tell themselves, ‘Let’s see how we also benefit from the surge and not just the shareholders.’ So after a period like this of increases, you see not only many realizations, but also equity compensation plans.”
Keren Kibovitz, owner of the financial consulting firm Kibovitz & Co. / Photo: Il יצהר
“Suddenly when the market goes up, everyone talks about companies that granted employees options during less good periods,” adds Asaf Glas, CEO of IBI Capital Equity Plans, which manages options for employees at many companies in the local market. “And that thing is contagious. It creates an effect of wanting to imitate successes. Therefore, we are seeing a dramatic change, with much broader entry into the trend in new fields.” Glas assesses that “this is happening both because people move between markets, and because this is a good compensation tool that has proven itself and more entities want to adopt it.”
In this context, he says, “There are now waves of layoffs in high-tech, and in the end even a construction company is looking for university graduates of certain ages who have skills that sometimes fit high-tech. So when companies compete in their market for talent, or for quality labor, they use options. It is also part of a general culture of adopting high-tech standards. If you go today to various financial companies, you will suddenly see dogs in the corridors, happy hour and luxurious design, things that once were reserved only for high-tech.”
Glas therefore expects this trend to continue and even intensify in the coming years. “I saw how even within high-tech it took time for the idea to seep in. If companies that granted options were once mainly from software, today everyone gets them, even hardware companies. So in my view, the trend is clear.”
“It gives a sense of belonging”
One of the pioneers of employee option grants is Shapir Engineering, which operates in construction and infrastructure, and began this practice already in 2014, when it went public. In 2021 it went further and announced an unusual option grant to no fewer than 850 employees. These vested over the past year, and according to estimates, every employee who has not yet exercised them has enjoyed an average profit of 345,000 shekels. Thus, over a period of more than a decade, the infrastructure company granted options to more than 1,700 employees.
Doron Hallel, North-Beton area manager at Shapir, who benefited from the company’s option compensation, tells Globes that “it is really not a given. In some cases these are people perceived as ‘invisible’ and ‘hard-pressed’, production workers who are all day in dust and dirt. But Shapir knew how to reach them and give them options. These are people who usually live in the periphery, and suddenly took home 40,000 to 50,000 shekels from each such round, and sometimes even more. Maybe they did not make a leap in terms of their financial abilities, but they could pay off a mortgage or renovate the house.”
Hallel says of an employee who managed to pay off his mortgage thanks to the first round of options he received: “He was a sorter at the plant, a production worker in every sense, managed to pay off the mortgage and then sent his child to higher education.” Hallel himself also used the money he received from selling the shares: “I had just bought a house, so it closed the issue for me perfectly. Now my wife wants to buy a new car, so I told her, ‘Wait with it, I’m supposed to have another round in half a year.’”
However, he says the options granted to him and his employees are much more than financial compensation. “In many places, production workers have a kind of sense of alienation toward the company, as if ‘we are not being counted’ and ‘managers only care about profit.’ With us it is the opposite, because in the end it gives you a sense of belonging. It’s not for nothing that I’ve been at Shapir for 13 years, and there are people here with much greater seniority. Every positive article about Shapir or rise in the stock, you say to yourself, ‘Wow, this is also me. It is not for nothing that I gave my sweat and tears so that this project would succeed, and so that the company would be where it is.’”
The boom on the stock exchange
An example of the enormous value options can create for their holders can be found at the Tel Aviv Stock Exchange. The huge rise of nearly 1,000% in the exchange’s stock over the past three years was taken advantage of by a series of vice presidents and other senior executives at the company, who in the past year and a half exercised shares in their possession for a total of more than 155 million shekels. Even after the sale, the exchange’s top 10 managers, excluding CEO Itai Ben-Zev, hold shares with a current value of about 122 million shekels.
By the way, employees of the Tel Aviv Stock Exchange also enjoy equity compensation granted to them under the collective agreement signed with them in 2017, under which shares amounting to about 6% of the company’s equity were allocated to about 250 employees. The allocation was made at a valuation of about 400 million shekels for the exchange, which has since its IPO soared and now stands at 14.6 billion shekels. The surge in the exchange’s stock has given the share package received by employees at the time a current value of almost 1 billion shekels, about 3.7 million shekels per employee on average. But according to the exchange’s financial reports, more than half the shares received by employees have already been exercised, and as of the end of 2025 employees still hold shares with a current market value of about 410 million shekels.
Last year’s cash-in by the exchange’s senior executives joined a wave of sales in which salaried managers at companies sold shares in an estimated volume of 1 billion shekels, about one third of them by mid-level managers. Among them were five managers at the oil and gas partnership Navitas (in the amount of 98 million shekels), nine managers at the defense company Bet Shemesh Engines (47 million shekels), and seven managers at the investment house Meitav (37 million shekels).
Another financial entity whose employees benefited from significant value creation over the past year, thanks to a generous option grant, is the investment house IBI. About four years ago the company allocated options to its employees and managers as part of its 50th anniversary celebrations. Three years later, toward the end of last year, dozens of the company’s employees chose to sell the options for a total of about 50 million shekels.
Those that have adopted a substantial distribution policy in recent years include the banks and the large financial companies, which granted options to hundreds of their employees. For example, the insurance company Clal announced a few days ago a plan to grant options to about 1,961 employees, of whom 296 are managers at various levels, while the rest are company employees. A week earlier, the credit card company Isracard announced the issuance of options to its 283 employees. Similar moves, though more modest in scope, have been carried out by all the major banks, which allocated options to hundreds of their employees. In an unusual step, Bank Leumi announced about three months ago a plan to allocate stock options to all bank employees. Under the plan, thousands of Leumi employees who were entitled last year to a bonus for their work, excluding management, will be able to convert 20% of the cash bonus value into options. Employees who chose to receive part of their bonus in options received an additional option grant from the bank of equal value.
Employees became millionaires
Probably the biggest success story in the context of employee options comes from one of the local market’s top-performing stocks, the defense technology company Next Vision. Since it began trading, the manufacturer of stabilized cameras for drones has granted options to dozens of its employees and managers in a variety of events, which translated into astronomical gains of hundreds of thousands of shekels per employee, and in some cases even crossed the 1 million shekel mark.
For example, a little more than two years ago Next Vision allocated options to about 30 employees at the company who are not part of management. The employees could begin exercising the options already this February, and their value based on the share price stands at more than 124 million shekels, while the exercise price of those same options stands at only about 16.4 million shekels. In other words, so far the employees, assuming they have not yet exercised the options, have recorded a paper gain of about 108 million shekels, reflecting an unprecedented profit of about 3.6 million shekels on average per employee. This came against the backdrop of the phenomenal rise in the company’s stock, which jumped by about 200% over the past year, while posting a gain of more than 2,000% over the past three years.
Another defense company that was early to grant employee compensation, which in the end reaped big rewards, is Bet Shemesh Engines, which in 2021 carried out an unusual option allocation to nearly 600 of its employees. Since that allocation, a large portion of the options have been exercised at an average profit of tens of thousands of shekels per employee. Employees who chose not to exercise their options are now sitting on average paper gains of almost 275,000 shekels, after the company, which manufactures and overhauls aircraft engines, has soared by more than 1,400% since then. Following the success of the move and the stock’s surge, the company’s management decided to launch a similar move and allocate additional options to 850 employees about two months ago.
A great tool for managing employees
Unlike Next Vision, whose stock has not stopped jumping since the IPO, the option allocation at Bet Shemesh Engines was carried out דווקא during a period when it was dealing with a prolonged stagnation in the share price. “There are dozens of studies showing that companies in crisis periods that decided to grant options to their employees got through the crisis periods better than companies that did not do it,” says Glas from IBI. According to him, “If you are in a workplace where there is a big question mark around it, you start looking left and right, but then someone comes and instills confidence in you, you are also willing to work extra hours. So you see people not leaving companies because they also have something to wait for, for the options to vest. It is a first-rate human resources management tool.”
Alongside all these advantages, Glas also notes the fact that unlike cash bonuses, options do not hurt the company’s cash flow. “A company that wants to bring in employees, but does not necessarily have the money, or wants to spend it on other things, can basically pay them without harming its cash flow. This is very significant for companies that need every shekel for their day-to-day operations.”
Kibovitz adds that in cases where the employees and managers earn high salaries, this is also a tax benefit. “Usually compensation for work comes in the form of salary on which you pay tax. In equity compensation you get a significant discount, because if someone is in the high income tax brackets, he can pay capital gains tax that sometimes may be half the amount paid on salary. This is an amazing tax advantage.”
However, she notes, “The most important thing in everything related to options is their emotional value. A person who works in a company and holds a share, no matter what part of the company it represents, can tell at the Friday dinner and boast to family and friends that he is a shareholder in the company. That tightens his connection to the company and makes him feel he belongs,” she concludes.
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