Member John Weber Speaks: Be Honest With Yourself
The Challenge:
The case at hand was brought to a recent Alliance meeting by an Alliance CEO who was considering whether or not to take the company public, but was concerned about his responsibility to employees who have been issued equity.
If you were in this situation, what would you do?
If there's little chance of a liquidity event, stop issuing stock, otherwise you're only digging the hole deeper.
Everyone in this group has weighed in on this issue, and you've heard a lot of great advice. Judging from your body language and your choice of words, it's obvious that your heart is still in the company and you're not giving up control. As the founder, that's certainly understandable. But you need to be honest with yourself, the chances of you giving up control are low, thus any liquidity event is unlikely.
I can see you clearly understand what this means. You've given your employees hope and promises that the equity you gave them will be worth money. But over time, they will realize that there is no return in sight and they will become disgruntled.
If it was my company, and if I had the means, my first step would be to create a cash pool and offer employees with equity a way to sell it back to the company. This would be ideal for employees who want to buy a house, send a kid to college, or take the dream vacation they've always talked about.
Secondly, I would ease away from the stock program in favor or a performance-based system and start cash payments instead of stock. Even if I was uncomfortable about going back to my existing employees with a new program, I would at least offer my new employees a different, cash-based system. If I don't, every time I hire another employee, I'd only be adding to the stock issue and digging the hole deeper.
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The Alliance of Chief Executives is an active community of business leaders that focuses on deep strategic exchanges, challenging existing assumptions and generating fresh ideas.
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