Once challenge with equity is that equity is the thing that is left over after you've distributed income and benefits. I've seen so many startups (some up-close) where those in charge are not working for equity, they are extracting all the value in the form of benefits and salary/bonus. The equity then ends up just a carrot for those at the bottom being leveraged to keep the cycle going.
Other misaligned incentives I've seen is company management paying low salaries but having a host of family/friends placed into figurehead wishy-washy roles in the company (again, extracting value misaligned with employees.)
I've also seen doctors practices where the doctor owns the facility and extracts above-market rents from the practice, leaving less for workers.
Once a company is in hyper-growth it is easier to find well-aligned incentives. However, before that, you really dont know unless you can see the salary/benefits of everyone (which obviously doesnt typically happen.)