Mortgage Savings

I understand that employees take cuts in pay and in return get generous equity. How does that equity materialize in the future? If one is promised, for example, $20,000 in equity but the company suffers, would the employee see that money in the end?

When you get equity, you are getting a portion of ownership in the company. Equity becomes valuable usually when either the company is purchased by another or it sells stock on the public markets (exchange like NASDAQ) also called "going public" or an IPO (initial public offering). When another company buys your company, your stock will be purchased, typically with either cash or the new company’s stock which if a public company, you can sell.

It is difficult to say whether you’ll get any money from your stock if the company suffers but the likely answer is "no". Your stock will probably be common stock which puts you last in line to get money in the event of financial troubles. The investors will get theirs first and rightfully so. With equity, you are basically getting a bet on the success of the company. If the company does well, it could make you a lot of money. It is a very good way to incentivise employees to work hard to make the company a success.