Beyond its generosity, the gift is a strategic effort to retain and attract key talent at the social media company, roiled by months of leadership uncertainty and questions over its long-term growth.
"It's a deliberate and wise and somewhat necessary move to shore up the talent you want to keep," said recruiter Jason Hanold, who places executives and top managers in the technology industry.
Twitter co-founder Dorsey, who was named permanent CEO earlier this month, made a surprise announcement late on Thursday that he would give shares worth $206 million (135 million pounds) to the company for free, in order to "reinvest directly in our people."
Shares of Twitter, which have fallen 44 percent in the past six months, closed up 3.9 percent on Friday.
The move was designed "to instill confidence in investors and employees to show he's trying to do the right thing for the company," said Dan Marcec, director of content and marketing communications at executive compensation data firm Equilar.
A top priority is to keep key employees happy after Twitter announced it would lay off about 8 percent of its staff earlier this month, soon after Dorsey took the job on a permanent basis.
The transfer of 6.8 million shares of common stock is subject to stockholders in 2016 approving an equity incentive plan for the shares to be granted "over time" to Twitter employees. The board has approved the deal.
Jim Hart, CEO of Senn Delaney, which advises companies on how to shape their cultures, said Dorsey was using his shares to essentially ask key employees "to stay the course with me."
He cautioned the extra stock would not take the place of Twitter fixing the company's business model, and if the shares decline, the gesture could fall flat.
That said, the extra cache of stock should prevent Twitter from having to issue new stock to hand out as options to employees, and thereby prevent the dilution of investors' stockholdings.
Hanold said Dorsey's stake would likely not be distributed among all staff, but rather to employees being wooed elsewhere.
Twitter said in July that monthly user growth was the slowest since the company went public in 2013.
Since Dorsey's return the company has unveiled several new initiatives. On Friday it announced that its new 'Moments' feature, which organises what it considers the day's best tweets about key events, will have its first advertisers this weekend.
(Reporting by Alexandria Sage and Deborah Todd; Editing by Bill Rigby)
By Alexandria Sage and Deborah M. Todd
