4 ms·
Are you actually offering them ownership, i.e. large enough equity to have any say in corporate matters? Not just financial instruments that can lead to ownersh
by nikanj 4y ago
Are you actually offering them ownership, i.e. large enough equity to have any say in corporate matters? Not just financial instruments that can lead to ownership after a years-long vesting schedule+exercising?
- eastbound 4y agoWill they perform better if I give them a million dollars for free?
- nikanj 4y agoSo your main complaint is: "People without ownership act without ownership"?
- eastbound 4y agoThe basic principle of ownership is: - You get $0 on day one, - After the job is done and it hits the market, you may get a million dollars. What employees want: - Be paid full market rate from day one even if it doesn’t work, - AND ALSO getting dividends if it works, It looks like you are just advocating to give them more more more. But let’s entertain the idea of implementing your advice seriously: - I’d have to hire entrepreneurs who understand how market moves and what the risks are, - I’d have to sell them stock on a given FMV that we determine together (Fair Market Value, =valuation per share), so FMV=0$ when the company starts, but it’s much higher when they join 5 years later when the product has already hit big and the good ideas are there. Estimating valuation is extremely hard and they would probably feel on the hook. If I value the current company at €6m, so let’s say €2m as a rebate, they’d have to get €600k out of pocket to buy shares; If they buy only €100k because they don’t have the lumpsum, they’d get 1/36th of dividends. We’ve made 1m this year, that guy would get 20k. You see, it’s hard to estimate a company clearly. If they don’t get large dividends, they’d complain I had cheated them with a too high valuation. And programmers in France don’t have economy education in their curriculum, so they’d think I cheated them, rather than them not producing the proper output (people with no economic education tend to get angry at people around them when they take the wrong decision), - They’d leave the boat to work somewhere else as soon as the market shrinks, and they’d still get 1/6th of our dividends without working for us, which has a disproportional impact on those who stay, When you think about how to do your advice in practice, I don’t think it solves what you think it solves.