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Employee motivation remains a key aspect of your business. However, giving out shares as a reward equates to ceding part of your company. Though a positive move in the sight of your employees, there are some critical concerns that you should analyze.
Some of the risks that are associated with giving shares to employees include: –
Company secrets may be at risk.It erodes the per value of shares.Additional expenses to acquire them back.Risk of conflicts when employees leave.
When the company is not performing well or during bad financial times, employee motivation can be achieved by way of giving shares. This can also be used to attract and retain top talent.
What modalities can you use to give employees shares?
Here are some ways to execute this reward system
1. Decide on How to Reserve the Equity Plan
This can be discussed during a shareholders meeting to develop a consensus on the matter. These are some possible solutions that can be weighed: –
Issuance of new shares- It involves creating a new class of shares. This can shield existing shareholders from tax liabilities which normally arises if they choose to give a part of the existing sharesAllocate shares from an existing class of shares- By using the authorized share capacity, a new class of shares can be issued to execute this plan.Institute qualification criteria- This can either be several years worked, waiting period, performance metrics, and any other metrics.
When planning to execute the issue, it is important to disclose to shareholders the full details about possible tax liabilities, dilution of value, and any other effect.
2. Administering the Plan
Depending on the size of the company, it is important to have a solid management system for this sc… Read More
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