The sale signs on a Thursday. Champagne in the boardroom, the founder’s signature drying on a tome of an agreement. By Friday the founder’s trust is wealthy for three generations, the two executives who held equity, for one. When the room empties, a greying woman named Noma stacks glasses and wipes the ring marks on the table. She has cleaned these offices for thirteen years, and her share of the moment is leftover cake. That agreement could pay her salary for the next ten thousand years.
Executives hold equity because ownership is strong medicine: it produces patience and lengthens the view. However, there are few honest answers about how it can be that such medicine stops working further down the payroll. Lasting value is created by a collective. Yes, founders and executives contribute unusual risk and judgement, and that can arguably justify greater ownership, but one can’t treat every other contribution as worth no real slices of the pie.
A company is a story enforced by law; ownership is the chapter deciding who shares its rewards. Employee ownership, in private and public companies alike, can, and should, be made fair, workable and real for all parties.
Every such proposal meets the same four objections: unfair to the talented, unworkable in practice, unreal in law, and ungovernable in the boardroom. Answering them is employee-benefit work, this readership’s trade.
What follows is one concept amongst many.
Rewind to the founding, and let the company choose differently this time. It fixes the total employee share of its economics at, say, 33 per cent, and issues economic units against it. Each unit is a contract: an enforceable right to a share of distributed profits, of growth in value, and of proceeds if the company sells. In a private company no market provides an exit, so the scheme does: a published valuation and scheduled buyback windows. A phantom scheme with teeth is real ownership, whatever it calls itself; an ESOP can be a costume: shares in name, worth nothing the day you lean on them.
Is this unfair to the talented?
Noma joins the same month as John, the CFO. Both receive a base allocation of units simply for belonging; John receives more, because his responsibilities are greater and pretending otherwise is dishonest. Each award vests over five years. Contribution is assessed annually, with stronger contribution earning more units. If either resigns in year seven, the newest awards die unvested and return to the pool; vested units survive, and the company buys them back at the published valuation, on a schedule that does not starve it of cash.
In her third year, Noma is rated strong and more units flow to her. One rule holds this ladder together: John’s annual award may never be worth more than, say, ten times Noma’s base. Salaries already reward rank. If units merely mirror the payslip, ownership adds nothing; the cap stops the pool becoming a second payroll.
Could this work in practice?
Noma’s pension already works this way: it belongs to her, yet she cannot spend it on Friday, pledge it or draw it at will, and nobody calls it unworkable. The harder question is whether any of it is real, with the tell being who each restriction protects. Vesting, preservation and orderly buyback windows protect the worker’s long-term wealth AND the company’s survival. Restrictions built so forfeiture can punish, so a rigged valuation stays hidden, so ownership never turns into money: such a scheme needs PR to cover its falseness.
And finally, how would you govern this?
The way companies already do: share classes and management incentives separating economics from control. Employee units voting on changes to the scheme itself; founders keeping a veto over the existential list: sale, purpose, major dilution, dangerous debt, dissolution.
This is not theory: Huawei pays dividends on phantom units to over 130,000 current and former employees while its founder holds under one per cent. WinCo, an American grocer, has till operators retiring as millionaires through its employee trust; Kumba’s Envision scheme paid 6,209 mineworkers roughly R575,000 each in 2011.
Nothing here needs inventing: vesting, preservation, valuation are the trustee’s daily machinery; nobody has pointed it at the employer’s equity. What is missing is the will to treat worker ownership as serious benefit design rather than a tick box in the due diligence pack.
Retirement funds hold power wherever they place capital and should use it to push for employee schemes fair enough to include everyone, workable enough to survive company life, and real enough to pay even when it hurts.
On some alternate Thursday, Noma wipes the same table the deal was signed on. Her phone vibrates. Thirteen years of her life, finally paid its share.