Million dollar question: Do employees deserve equity?

by HCA28 Apr 2016
One company has decided to give all of its 2000-strong workforce equity in the business, in a decision that could make some millionaires in the future.
 
The owner of US-based yoghurt company Chobani –a product stocked at Coles and Woolworths – announced on Wednesday employees would be given shares worth a total of 10 per cent of the company when it goes public or is sold.
 
Hamdi Ulukaya, the Turkish immigrant to the US that founded the business in 2005, announced the plan at a dramatic staff meeting in New York state.
 
He said he had made the decision because he wanted employees to share in the wealth they had helped create over the last 10 years at Chobani. He told the New York Times he expects his employees will likely work harder to build the company now, because they are building their future at the same time.
 
“I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people,” Ulukaya said.
 
To break the news, the company gave each employee a white packet with information inside about how many Chobani shares they were given.  Interestingly, their stake in the company was determined wholly by their length of employment, rather than by any performance-based measures.
 
As the company is worth several billion dollars, the longest serving staff will be worth millions if the company launches an IPO or is acquired. The average employee would get US$150,000 in shares based on a $3bn valuation.
 
Lead project manager Rich Lake, one of Ulukaya’s original five employees, said the shares were “better than a bonus or a raise”. “It’s the best thing because you’re getting a piece of this thing you helped build,” he said.
 
Lake said the acknowledgement of what he and other employees had put into the company was more important than the dollar value of shares received.
 
The New York Times reports that employees are able to hold their shares even if they leave or retire from the company, or the company will buy them back. A public listing or sale is not expected in the very near future.
 

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