Founders, CEOs and employees all agree that employee equity should be more readily available.
The Impact of Coronavirus on Employee Ownership
The pandemic has affected many major business decisions across 2020. Businesses have seen major cost-cutting (33%), staff furloughs (28%), freezing hiring (24%), freezing promotions and raises (26%), salary cuts (19%) and job cuts (18%). Yet, it is not all doom and gloom. In many cases, business leaders have changed their mentality and explored new possibilities for their employees. In a year in which the wealth gap has widened exponentially, attitudes are changing about the need to share the fruits of business success more widely, including company equity.
Equity management fintech, Capdesk, carried out research which surveyed employees, founders and CEOs at private equity-backed UK startups and scale-ups. They found the strength of feeling is such that the vast majority of employees (80%) and business owners (78%) actually agree companies should be required by law to offer equity share schemes to their workforces.
The Covid Effect: A Fairer Future
Founders and CEOs (94%) feel even stronger than employees (90%) that business has a responsibility to play a leading role in making society fairer, with 89% indicating the pandemic has made them more focused on how their own company can directly contribute to this cause. What’s more, they are willing to follow through on that belief with over three quarters (77%) saying the Covid crisis has made them more likely to offer, or increase, employee equity. On the employer side, 80% of workers polled said they would prefer to work for a business that offers an employee equity share scheme, while 79% would be more committed to, and work harder for, a company that does.
Christian Gabriel, CEO and Co-Founder of Capdesk, says: “We know the employee equity drumbeat has been growing louder but we were still pleased to see the extent of enthusiasm uncovered in this research, in particular how closely aligned management is to its employees.”
Employee Cash Out Predictions
Although it is a widely accepted notion that the ultimate goal is for startup employees to cash out on their equity, only 13% of those surveyed see this as a realistic route to liquidity. Instead, they view the possibilities as the company buying back shares (32%), selling shares to an investor or board member (32%), selling shares to a third party (31%) or acquisition or merger with another company (25%). There is also a growing shift to employees releasing their shareholdings sooner; 57% claimed they would wait no longer than 4 years and nearly a third are unwilling to wait more than 2 years.