Short answer: company stock is too much when a fall in one employer's share price can damage your financial plan, job income, and future equity value at the same time.
There is no single percentage that works for every employee. A founder, early executive, senior engineer, and new graduate can all have different capacity for risk.
But there is one rule that works for everyone: measure the concentration before defending it.
Count all employer exposure
Most employees undercount their employer-stock risk.
They look only at vested shares in the brokerage account. That misses the bigger picture.
Add:
- ✓Vested employer shares.
- ✓Unvested RSUs.
- ✓Expected refresh grants.
- ✓Employee stock purchase plan exposure.
- ✓Salary and bonus dependence.
- ✓Career risk.
If the company has a bad year, several of these can move together. The stock can fall, bonuses can shrink, refresh grants can weaken, and layoffs can rise.
That is why employer stock is different from a stock you bought casually in a personal account.
The cash test
Ask one question:
"If I received this amount in cash today, would I use all of it to buy my employer's stock?"
If the answer is no, holding all vested shares deserves review.
This question removes history. It does not care what price the shares vested at or whether the stock has already done well. It asks whether today's position still fits your life.
The sleep test
Now ask:
"If this stock fell 40 percent, what would I need to change?"
Would you delay a home purchase? Change a relocation plan? Cancel a startup idea? Reduce family support? Delay financial independence?
If a single stock can force those changes, the concentration is material.
A practical threshold approach
Instead of searching for a universal number, choose a personal threshold.
Some employees set a limit based on net worth. Others set a limit based on future income. Others sell a fixed portion at every vest until company stock stops dominating the portfolio.
The threshold should be written before the next vesting date. If you wait until the stock moves sharply, the decision becomes emotional.
What this does not mean
It does not mean every employee should sell every vested share immediately.
Some people can afford more company-stock risk. Some have tax reasons to wait. Some want a defined amount of employer exposure because they understand the risk and accept it.
That is fine.
The problem is not holding. The problem is holding without a rule.