Making Your Employees Feel Like Partners

Company owners and management will always be at odds with one another. The former group's goal is, for example, to keep expenses down, whereas the latter group's goal is, for the time being at least (who can say what tomorrow), to collect enormous wages. Companies listed on stock exchanges may have a longer-term perspective on things, while the former may be more focused on the short-term goal of increasing stock value. Stock price appreciation, as measured by quarterly and yearly profit numbers, is important to American shareholders. As a result, there is less space for investments in infrastructure, R&D, and technical innovation. The idea is that employees who also hold shares will steer clear of these destructive feuds that can bankrupt and technologically derail businesses. We shall devote a whole piece to the entirely unrelated subject of whether reality remains dependent on theory.
One can get a stock option if they want to buy (or sell, although we won't be dealing with stocks here) a certain amount of stock at a set price (the strike price) on a specific date. For private companies, stock options are not exchanged. For public companies, whose shares are traded on a stock market, stock options are traded.

Options on stocks serve dual purposes: they are a popular investing and speculative tool in many Western markets, and they can help you protect your stock position by allowing you to sell your stocks at a predetermined price (as in the case of put options). You can make a ton of money with almost any money out of pocket and almost little risk (you can lose only the amount you put into buying the option).
As a creative tool, stock options allowed shareholders and owners to incentivize employees to work only for the company. In the past, only top managers who were seen as indispensable were granted such benefits. All employees eventually started to have similar chances as corporations grew to realize that their staff were their most valuable asset. One kind of employee pay is the incentive stock option program, wherein the employer offers workers the chance to buy business shares at a set price (lower or equal to the market price when the option was granted) over a specified period of time. Top executives of Fortune 500 companies in the US now get most of their pay from options profits, and the practice is spreading even to more traditionalist parts of Europe.
An employee's ability to acquire stock in a company can be facilitated by a formal program known as a stock option plan. A common practice is for employers to provide their workers with subsidized loans or even match their purchases of shares; that is, for every share an employee buys, the company would provide an additional share at no cost to him. Many businesses provide their workers the chance to purchase stock at a discount, allowing them to make a quick profit. (Some companies do it automatically and with no or low brokerage fees) When employees get dividends on their shares, they can reinvest those funds into more shares of the company. Wage "set-aside" programs are commonplace in many organizations; under these plans, workers can routinely invest a portion of their salary in the company's stock at market pricing. Employee Stock Ownership Plans (ESOPs) are another popular option, and they allow workers to gradually build up their shareholdings with the possibility of taking over the company.
I propose that we take a close look at the following schemes:
Reagan was the one who started it all. Under the Economic Recovery Tax Act (ERTA-1981), which he had enacted during his administration, certain stock options ("qualifying options") were exempt from taxes both on the grant and exercise dates. Preferential (lower rate) capital gains tax was applied to profits on shares sold after being held for at least two years from the date of issuance or one year from the date of transfer to an employee. Thus, the "Qualifying Stock Option" was born as a brand-new category of stock options. Under American law, an employee could have the opportunity to buy into the company's capital stock at a discounted price through an option, as long as he met certain requirements laid down by the Internal Revenue Code. In order to be eligible, the option plan needs to have the shareholders' approval. Additionally, the options can't be traded on the stock exchange or privately for a specific amount of time. The employee who receives the stock options (the grantee) cannot own more than 10% of the voting power of the company unless the option price equals 110% of the market price. Additionally, the exercise price cannot be less than the share market price at the time the options were issued. The option cannot be exercised more than five years after it is granted. Neither the grant nor the exercise, when the employee turns the option into shares that he can sell on the stock market for a profit, incur any income tax for the employee. Another option can be granted with a reduced exercise price if the market price falls below the option price. The maximum value of stock options that can be exercised in a single calendar year per employee is 100,000 USD.
Employee Stock Ownership Plans (ESOPs) were established as a result of this regulation, which aimed to elevate stock ownership and foster a stronger connection between employees and their businesses. Such programs exist to facilitate the acquisition of stock by workers of a corporation. The management of the company is something that employees may take part in. They have the option to assume control (while retaining all rights) in specific circumstances, such as when the company is in dire need of rescue. Workers have the right to request ownership rights in exchange for wage reductions or other work-related concessions if the company is in danger of closure ("marginal facility").
What is the best way for a corporation to distribute its stock to its employees?
The only rule is that ownership and control don't have to change hands. Several approaches:

The corporation holds an open tender where employees can bid on share cum options packages of varying proportions.
All members of senior management, for example, have the right to buy the same number of shares—the corporation sells its shares to the employees on an equal basis—and then the workers are free to trade the shares amongst themselves.
One or more existing shareholders may be granted the authority by the firm to offer their shares to the employees, or to a designated group of employees.

Whenever an employee exercises his right to convert his stock options into shares, the money normally ends up in the company's coffers. The amount of shares set aside by the company in its books is enough to cover the demand that will be created when all the stock options are converted. To address this demand, the corporation may choose to issue additional shares. Very seldom do other shareholders' stock options turn into their own shares.
The (unexpectedly) questionable usefulness of stock option programs will be discussed in a subsequent essay.
Wow, that's funny!

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