Why we rebuilt our stock plan for flexibility (and how you can too) – TechCrunch


Mailchimp done headlines from last month when it was sold to Intuit for $ 12 billion, but many of the stories surrounding the news were far from bright. Its 1,200 employees have not gained any stake in the company and have lost the life-changing financial advantage that would normally come with a deal of this magnitude.

We know this isn’t the norm – most startups follow a standard regulation for issuing employee shares, but it’s a system full of complications. The industry has even coined terms like “gold handcuffs” to describe one of the all-too-common scenarios where employees have millions in stock options but can’t afford the taxes they would have to leave their current company before a liquidity event. such as an IPO or acquisition.

Employee equity status quo won’t work much longer. As the war for talent rages, companies are becoming more competitive in terms of base salary, bonuses, benefits and job flexibility. Equity is set to be the next change in the battle for talent.

The most competitive startups will not only give their staff the shares they deserve, but they will also do so in a fiscally facilitated, risk-free and highly customizable way. At the beginning of the journey to build my Postscript startup with my co-founders Adam Turner and Alex Beller, we decided that an equity plan that put employees first would be a top priority. We had never done this before and weren’t following the standard playbook, so it took time, research and creativity.

Flexibility and choice are key to employee equity

Our first initiative focused on providing employees with an extended operating window. If someone has been in the company for two years and leaves, they don’t need to buy stock right away. In fact, they have up to five years to make this decision. This is a great option for employees who want to “wait and see” and reduce their capital risks.

Over the next few years, I predict that we will see a change in the way employers view equity as an advantage and that flexibility will become the norm rather than the exception.

The next component of our program was in response to the demand from employees confident in our long-term prospects. We have developed a plan that allows employees to exercise their stocks early, in effect at any time. This is a great option for employees who strongly believe in our success and who want to take advantage of the tax benefits of early purchasing their shares.

With these two programs, we assume nothing about each employee’s personal situation or impose our beliefs on anyone. We are also careful not to make any promises about the future that could influence decisions, as we have seen happen with Mailchimp. We do not believe declarative statements such as “we will never be public” or “we will never be acquired”, even if well intentioned. No executive can fully predict the future with absolute certainty.

For companies that are ready to revamp their employee equity plan, here are some key lessons we’ve learned along the way:

Get consent from your board of directors

The first step should be a discussion with your board, probably at the next board meeting. This group of individuals usually hold a significant stake in the business, so they may be as involved in the decision as the founders. If you drive with the business benefits that changes could have on recruitment, culture and morale, your opportunities for pushback will be limited.

Get outside support from legal experts

After the key stakeholders have been aligned, insert the experts. Unless they’re already on the team, find a law firm or legal counsel who has a thorough understanding of employee equity. They will have to consider every possibility and develop new documentation and contracts that may not already exist. Our legal partner played a huge role in ensuring our plan went smoothly.

Double the training of employees and candidates

Finally, people and recruiting teams should be well educated on the program. It is their responsibility to ensure that employees and potential customers understand how the program works, as well as the implications of the decisions they make. Equity is complex and can be difficult to understand, so this venture should not be approached lightly and should be continuous.

Over the next few years, I predict that we will see a change in the way employers view equity as an advantage and that flexibility will become the norm rather than the exception. At the end of the day, this is good news for both employees and employers.


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