When workers are compensated partly in unvested equity, they may leave the firm if they observe low managerial effort, reducing the firm’s value and the manager’s compensation. We call this the worker monitoring channel. Through this channel, unvested worker equity grants can increase managers’ effort incentives, despite diluting the manager’s equity stake. Worker monitoring also links compensation markdowns to managerial incentives, since worker exits are more costly to the firm and manager when workers are underpaid. Our model identifies a new governance role for rank-and-file workers, provides a new explanation for the use of broad-based unvested equity compensation, and generates testable predictions about how worker equity interacts with compensation markdowns, labor bargaining power, capital structure, and managerial performance.