want to align my employees successes with the business with their personal success to help create a collaborative enthusiastic culture
I am the MD of a $100m Technology company who operated a share incentive program until we were acquired by a Private Equity company in 2019.
This is all very much dependent on the value different people take to the table and who currently owns the equity. It is common for Management teams to hold anywhere from 3% to 20% of the total company's equity with the CEO having the largest share as you work down the value chain.
Once you have established how you wish to distribute the equity, formalizing should be a relatively simple process.
I would be happy to talk through your requirements in more depth at your convenience.
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Answered 2 years ago
Implementing an employee equity share program can be a complex process and there are several factors to consider. Here are some key considerations to help you get started:
Determine the percentage of equity: The percentage of equity to allocate to employees will depend on several factors, including the stage of the company, the size of the team, and the nature of the business. A common approach is to allocate 10-20% of the company's equity to employees.
Decide on the type of equity: There are different types of equity, including common shares, preferred shares, and stock options. Common shares are the most straightforward and give employees the right to vote and receive dividends. Preferred shares have preferential treatment over common shares in the event of a liquidation or sale of the company. Stock options give employees the right to buy shares at a fixed price at a future date.
Determine the vesting schedule: Vesting refers to the process of earning equity over time. A common approach is to have a four-year vesting schedule, where employees earn equity over four years with a one-year cliff, meaning they need to stay with the company for at least one year before earning any equity.
Consider tax implications: There may be tax implications for both the company and employees when implementing an equity share program. It is essential to seek advice from a tax professional to understand the tax implications and ensure compliance with relevant laws and regulations.
Develop an employee agreement: Once you have decided on the percentage of equity, type of equity, and vesting schedule, you need to develop an employee agreement that outlines the terms and conditions of the equity share program.
It is recommended that you seek the advice of a lawyer and other professionals, such as an accountant or a financial advisor, to help you navigate the complexities of implementing an employee equity share program.
Answered 10 months ago