The basic principle of ownership is:
- You get $0 on day one,
- After the job is done and it hits the market, you may get a million dollars.
What employees want:
- Be paid full market rate from day one even if it doesn’t work,
- AND ALSO getting dividends if it works,
It looks like you are just advocating to give them more more more. But let’s entertain the idea of implementing your advice seriously:
- I’d have to hire entrepreneurs who understand how market moves and what the risks are,
- I’d have to sell them stock on a given FMV that we determine together (Fair Market Value, =valuation per share), so FMV=0$ when the company starts, but it’s much higher when they join 5 years later when the product has already hit big and the good ideas are there. Estimating valuation is extremely hard and they would probably feel on the hook. If I value the current company at €6m, so let’s say €2m as a rebate, they’d have to get €600k out of pocket to buy shares; If they buy only €100k because they don’t have the lumpsum, they’d get 1/36th of dividends. We’ve made 1m this year, that guy would get 20k. You see, it’s hard to estimate a company clearly. If they don’t get large dividends, they’d complain I had cheated them with a too high valuation. And programmers in France don’t have economy education in their curriculum, so they’d think I cheated them, rather than them not producing the proper output (people with no economic education tend to get angry at people around them when they take the wrong decision),
- They’d leave the boat to work somewhere else as soon as the market shrinks, and they’d still get 1/6th of our dividends without working for us, which has a disproportional impact on those who stay,
When you think about how to do your advice in practice, I don’t think it solves what you think it solves.