Employee participation becomes more and more important

Salaries at the top are always fodder for debate, but about the earnings of Tesla’s CFO, Zach Kirkhorn, even the biggest critics of top pay won’t grumble: He received a base salary of $300,000 a year. Is $300,000 a low salary? For a role at one of the world’s highest-rated exchange-traded funds, at least it’s pretty modest. The big difference in this CFO’s favor is that he did get a lot more out of his time at Tesla in another way: with stock options. Kirkhorn’s wealth grew by as much as $590 mln over the last four years through option packages. These generous option packages are often a major reason that top executives like this CFO remain loyal to their company. I appreciated the article in the FD and especially because the Tesla company and its CEO enjoy a certain notoriety.

But even in less well-known companies and positions, the combination of a (modest) salary and some form of employee participation is increasingly common. Cleaners, gardeners or hairdressers who work for a boss, but are also co-owners of the company at the same time. More and more employers of small- and medium-sized companies (startups / scale-ups) are trying to bind their employees to the company by making them “shareholders” (personally I think “stakeholder” is nicer).
In large consulting and law firms, this has been happening for some time. In those firms, the top people are joint owners. But now also about 10 percent of SMEs offer their employees the opportunity to become shareholders or even co-owners of the company. This does not just involve the top, but rather employees at all levels of the company. They help decide the course of action and share in the company’s profits and losses.

The idea is to bind staff to the company especially in times of labor shortage. Research shows that employees are more productive and perhaps more importantly that it has a positive impact on job satisfaction, the bond between company and employee and thus loyalty to the company.
Employees who are co-owners of the company benefit in this way from the profits that are made and can begin to build some more wealth. Employees who share in the profits are more satisfied and involved in the company and this is reflected in the company’s results. These are just a few of the benefits of employee financial participationPositive effects employee participation
Having employees participate financially has many positive effects. We list the most important benefits:
– The productivity of companies with broad financial participation in the form of shares is higher;
– Companies with company-wide employee participation grow faster and are more profitable;
– Financial participation promotes employee entrepreneurship;
– Participation offers employees the opportunity to build additional wealth and generate additional income more tax-favorably;
– Employees stay longer working for participatory companies (engagement and bonding is greater);
– These companies with broad employee participation fail less often, recover earlier and better from a crisis, and lay off fewer people in times of crisis;
– Profits (dividends) are distributed fairly, creating collectivity and employees also benefit from the profits made.
Actually, this applies to all forms of employee participation. Whether this is a simple profit-sharing arrangement, a complex stock option plan or interesting Stock Appreciation Rights (SAR).

So why don’t we see it more often in the Netherlands? In France, for example, the number of companies with some form of participation is four times higher. Unfortunately, this is also due to legislation and tax rules, which leave entrepreneurs in the Netherlands less room to implement this. Trade union CNV therefore argues for a tax-friendly solution to make it possible for employers to set up annual employee participation schemes, for example by taxing specific profit sharing at a lower rate.
The Ministry of Finance currently sees no reason to adjust the regulations. And that is unfortunate. In this labor market, it is precisely now of great value to introduce an employee participation plan. A great incentive benefit that can attract and retain employees.

Yes, it is true that implementing such a program takes some preparation, but in the end, every employer and business owner, small or large is going to benefit.
Make the employee a full-fledged stakeholder, like Tesla’s CFO. He may have had a modest salary, but he is an engaged and satisfied employee and has remained loyal to the organization for years.