We like it when companies make broad-based grants of equity awards to all of their employees. These moves show that stock compensation and share ownership are not just for executives and directors but are also practical, commonsense ways in which companies can reward rank-and-file employees above and beyond salary and encourage a commitment to workplace excellence through a culture of employee ownership. From an economic perspective, the wealth that middle-class employees can create through grants of stock options and restricted stock/RSUs has the potential to reduce income inequality.
Unfortunately, many employees and managers saw a significant reduction in their equity compensation after stock option expensing became mandatory during the last decade. This is why we are especially pleased by the new generation of broad-based grants that we have observed. In perhaps the most famous example, last year Apple declared its intention to issue RSUs to all of its employees, as reported by an article at the tech-news website 9to5.
Now Chobani, a popular yogurt-maker, has announced that all 2,000 of its employees will receive shares worth 10% of the company when Chobani eventually goes public or is sold. This move was both reported and praised by several high-profile media outlets, including The New York Times and NPR. The Times estimates that if Chobani were to be valued at $3 billion in an IPO or acquisition, the average employee stake in the company could be worth $150,000—and some long-tenured employees could have stock worth more than $1 million.
Chobani's gesture is very good news to Professor Joseph Blasi of Rutgers University. A long-time advocate of employee ownership, he has extensively researched this topic and recently co-authored a book called The Citizen's Share: Reducing Inequality in the 21st Century. In an article for The Huffington Post, he states that Chobani's push to award equity for all workers may be part of a new trend in employee ownership. "When you taste that next teaspoon of Chobani," he writes, "you may be tasting a new corporate ideology of shared capitalism, inclusive prosperity, and profit sharing." As he puts it, this broad-based grant is "a promise that any future Chobani shareholders will not simply be those who play the stock exchanges but will also include those workers who help create the broad wealth that stock markets are supposed to be all about." He then asks whether "middle class capital shares" of this type are a possible alternative to tax redistribution that could help to counteract the recent stagnation of wages among the middle class in the United States.
Another private company encouraging broad-based employee stock ownership is Zingerman's, a mail-order purveyor of gourmet food that has grown out of a popular deli and restaurant in Ann Arbor, Michigan. Valued at $60 million, Zingerman's has given employees the opportunity to buy stock at $1,000 per share and is offering to help them finance purchases, according to an article at Forbes.com. More than 200 employees have elected to buy stock. Ari Weinzweig, a co-founder of the company, observes that this initiative is "allowing people who don't have the cash, but who have the emotional and intellectual interest and engagement and want to commit to it, to do it." (For more about this program and other topics, listen to an interview with Mr. Weinzweig at the website of WBUR, a radio station in Boston.)
This trend toward broad-based grants reminds us a little of the optimistic, positivity-charged culture of employee ownership in which stock options first thrived during the 1990s. In fact, we started myStockOptions with the primary goal of providing stock plan education for these employees. As we recently wrote in a retrospective piece, the 1990s "democratized stock options, bringing them down from the lofty heights of Mt. Executive into the workaday foothills of middle-class people who in an earlier era might never have heard of them." As the examples above show, stock compensation continues to have the potential to improve the financial wellbeing of anyone, not just those at the top. All you need are the right equity incentives and some honest, hard work.