Employee stock ownership plan
During the economy boom it is becoming harder and harder for every company especially in the IT business to offer interesting benefits for their employees. Capable people are becoming the most valuable asset a company has. Other once important assets - patents or trademarks - are starting to play a second-rate role.
The question is what to offer to be different as an employer? Home office, flexible hours and new offices are becoming a standard and ceasing to be considered as a benefit at all.
One of the possibilities is an employee stock ownership plan. With the integration of a stock ownership plan, chosen or eligible employees may have the option to acquire an ownership interest in the company.
In addition to the benefit itself, it is also the most effective way to motivate employees, when they realize that the results of the company will have direct impact on them as shareholders.
Even a small number of shares is enough for the employee to realize that company's results will have also an impact on him, especially if the number of shares acquired or the amount of the option depends on the performance.
Employee shares can be a good servant, but a bad master. Great attention should be paid to the rights and obligations that will apply to the employees' shares. The contractual freedom gives the employer a broad opportunity to set rights and obligations related to the shares.
Concerns about influencing day to day operations of the company can be minimized by withdrawing voting rights of employee shares in the general meeting. However, it is necessary to bear in mind the company's obligations related to the entry in the Commercial Register in case of changes related to the shares.
In case of termination of employment, the resale of shares purchased under the employee stock ownership plan can be set contractually between the employee and employer.
Last but not least you have to keep in mind, that the employee shares can be a valid point for investors for leveraging a discount when trying to acquire the company. If the set up of the employee shares is done incorrectly, even 1 key employees can block the whole transaction. Therefore phantom shares can be also a viable option to offer to the employees, but without the rights and obligations connected to standard shares.
In conclusion an employee stock ownership plan is a great way how to motivate the employees and it gives them the feeling that they are more than just employees. They are a part of the company, but it has to be done right.
If you would like to talk more about this issue or need advice, just contact us!