Liquidity And Employee Stakeholders
September 5, 2019 | Blog

Liquidity And Employee Stakeholders

What responsibility do corporations have to all of their stakeholders?

The Business Roundtable tackled the complex issue with a new Statement on the Purpose of a Corporation on Aug. 19 (the “Statement”). Signed by 181 CEOs from many of the nation’s largest companies, the Statement addresses the growing perception that capitalism is benefitting some disproportionately to the detriment of others.

Notably, the Business Roundtable said corporations should be concerned not only with shareholders, but all of their constituencies – customers, employees, suppliers, and communities. “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country,” the Statement said.

Shared Benefits

This issue will continue to be discussed in boardrooms across the country, but closer to home in Silicon Valley, what role could the innovation economy play in advancing the Business Roundtable’s call-to-action?

We believe one way could be for private tech growth companies to be more open to providing liquidity to employees whose wealth is locked up in their company.

Corporate sentiment seems to have shifted over the past decade. More companies appear to appreciate the value of allowing employees to sell shares prior to a liquidity event to buy a home, finance an education or pay down student loan debt. That’s particularly important given that companies are tending to stay private longer.

Yet, many other firms in the venture ecosystem seem reluctant to do so. They fear they will lose control of their valuations and cap tables.

A Liquid Market

That fear may have been a holdover legacy before there was an established alternative investment class and a liquid secondary marketplace.

Since 2009, almost 300 late stage-venture-backed companies have authorized share sales at SharesPost, some of which subsequently had formal exits of an IPO or acquisition. Many of the secondary transactions benefitted a wider array of the workforce, including engineers, marketers, support staff and back-office workers, not just founders and C-suite executives. For instance, a company-sponsored program could allow for liquidity among all the participating employees.

Such programs allowed the companies to remain in control of their shares and investors, and, just as important, strengthened the companies’ corporate culture. We believe that enabling employees to monetize their value creation can be a powerful demonstration of an employer’s commitment to its workforce.

Greater employee loyalty and engagement may also translate into happy and motivated employees that can ultimately become brand champions and create additional shareholder value.

Liquidity programs – either programmatic, company-sponsored initiatives or individual stock sales – can also be a strategic way for private growth companies to compete against public tech companies offering higher salary and bonuses, public company equity, unlimited PTO, attractive healthcare and retirement benefits, and other in-office perks. Unlike many of these other employee benefits, the cost to companies to offer liquidity as an employee benefit can be seen as de minimis.

Corporate Responsibility for the Welfare of Employees

We believe that all these can be sound business reasons to provide liquidity to employees, but the Business Roundtable’s new vision about the role of corporations adds another dimension to the argument.

Even though employees may contribute greatly to the success of a company, large shareholders generally are the beneficiaries of the wealth created from such success in the private market. Shouldn’t employees, whose passion and intelligence are responsible for a good portion of the wealth creation, be allowed to share in it, as well?

Bonnie Hyun is Managing Director and Head of Platform Solutions & Strategy for SharesPost.

DISCLAIMER: This blog does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The information contained in this blog has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

None of the information contained in this blog represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

Any securities offered are offered by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost Inc. Certain affiliates of these entities may act as principals in such transactions.

Copyright © SharesPost, Inc. 2019. All rights reserved.

Bonnie Hyun

Bonnie Hyun

Bonnie Hyun is Managing Director and Head of Platform Solutions & Strategy for SharesPost.

DISCLAIMER: This blog does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The information contained in this blog has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

None of the information contained in this blog represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

Any securities offered are offered by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost Inc. Certain affiliates of these entities may act as principals in such transactions.

Copyright © SharesPost, Inc. 2019. All rights reserved.