I have had the pleasure of working with the same guy for 33 years and he has always promoted sharing both the risk and successes of new companies. Some people would say that I am no where near as wealthy as he is, so is he really sharing? I would have to reply that there are many people who are as wealthy as he is and that he has never stopped anyone from taking risks that result in large wins. I guess I am a bit risk averse and that is why he is slightly better off [grin].
Every risk does not result in a win and that is something that people seem to glaze over. Some start-up companies are founded by people who want to take all the risks and the associated profits. Historically speaking that is the way that companies have been founded and run for many generations. Companies are founded by people who have money or who can convince other people with money to invest in them. It takes a special kind of person to want to share the risk and success.
I have noticed that when a company fails, employees are quick to blame management. By sharing both the risk and the success, it is allot harder to focus the blame. In a company where everyone is a shareholder, everyone has a say with respect to the decisions that company makes. It is not always easy for the management team to listen to its minority share holders, but that is its mandate. If you take their money, you are supposed to listen!!
I believe that independent of the size of the company, there is always room for employees to participate. Participation can be in the form of stock options or outright stock purchases, but it is important for the employees to realize that stock is a risk. If you were starting your own venture the risks would be much higher and that would motivate you to work harder to insure success. By creating companies with stock option plans, both management and employees benefit by sharing the risk and increasing the internal drive for success.
There have been several companies in Ottawa that have used stock options to offset salaries, setting the expectation that the shares would compensate for the upfront sacrifice. In some cases that worked out but in a few others, the companies had preconceived exit strategies that meant the shares would never reach a reasonable price. Luckily I have never been involved with a company like that, but I have watched it happen as an outsider. I am pointing this out to highlight the importance of a trustworthy management team.
Some would say that I am a risk taker because of the number of start-up companies that I have been involved with. Pre-bubble tech companies were less of a risk but the post-bubble world has been brutal. In every case I knew that I had a trust-worthy management team and a chairman with a track record for success. I have won and I have lost and I am grateful for the opportunities that I have been given. I will keep on trying and someday I hope to be in a position to be there for others.