Treating Employees Like Shareholders

Much is made of delivering value to shareholders. Ask any senior director, manager or member of the board what his or her goal is in the company, and that will be the most likely response. It’s predictable, and it’s a cop-out. More on that in a moment.

The term shareholder refers to those who have made an investment in the business – those who have a stake in it. Those who have put the most in, also have the most to lose. These people are known as key shareholders.

Key shareholders are those with the most invested in the business – those who bring the most to it; those without whom the business would fail. Those who have the most to contribute also tend to be those who are very rich, very senior, or both. There are many reasons for this, but one that is often overlooked is the fact that stock options are only offered to those at the top of the organization. In other words, no one else is given the opportunity.

But what of those who are not considered to be quite so important? Are they to be ignored? In other words, is it okay to be beholden to some shareholders while ignoring the rest? A “yes” answer is implied in the word key. It’s impossible to draw a different conclusion.

The truth of the matter is that the smaller shareholders are just as vital to your business as the others. That’s why it’s a cop-out to claim that you want to deliver value to your shareholders. It’s hypocrisy to use a general term for something that you intend to be specific.

So the question is, who are your shareholders? Who else is there? And the answer is that there a lot of people. They are found in your suppliers, customers and employees. An entire article could be written about the roles that each of them plays in the success of your business.

But there’s a category of shareholders that you probably haven’t thought of and which are vital to your success. They are found among your employees, but don’t include all of them. Intrigued?

Depending on who you ask, roughly half of Americans have investments in mutual funds. As you know, these funds are made up of companies selected by a fund manager on the basis that they have or will provide a good return to the shareholders. If your company sells its stock on Wall Street or in some other exchange around the world, then the chances are very good that a significant number of your employees have invested their money in your company; and that puts them among the shareholders to whom you claim that you want to give value.

What happens? Do you, in fact, give your employees the same value as you do to the obvious shareholders? This is a serious question. It’s one that you need to contemplate. If you’re like most companies, you probably haven’t given your employees a second thought in this respect, and you need to.

You see, one of the most effective means of motivation in the workplace is known to be profit-sharing. And in a small way, when you pay dividends, for example, you are sharing your profits with all of your investors.

What could you do to encourage your employees to invest in the company?

A good starting point, and one which few of your competitors use, is to offer stock options to everyone; not just those you consider to be key players. That alone will send an unequivocal message that opportunities exist for everyone, and it will unify your work force behind a common purpose.

And after all, isn’t that what you want?