Shares are
forever

ATTRACTING AND RETAINING TALENT WITH EQUITY

Equity in early-stage businesses can be useful in incentivising talent to join or remain. It avoids higher costs today by substituting salary for shares but depending on how the equity is structured or implemented, the recruitment or retention challenge may simply be exchanged for a different set of issues that become more complex to manage in the future.

If your motivation is employee participation and ownership, then you will likely have time to explore alternatives, different classes of shares, voting rights, conditions, dilution and other incentive structures.

If your motivation is to hire or retain a key employee, then your approach may be more reactive, and you can unintentionally create complexity that arrives sooner than expected:

• You create a division between employees that may not be based on merit, potentially disincentivising others.
• Behaviours and expectations can change when equity is granted, not always in a positive way.
• The employee may still leave, or the new hire may not work out.M/li>
• Additional shareholders can complicate governance, future investment rounds and business sales.

None of this means that employee ownership is wrong. In many businesses it can be highly effective. The key is understanding whether you are building a long-term ownership model or responding to a short-term people challenge.

The difference matters because the people problem may disappear. The shares remain.