What Twitter CEO Jack Dorsey Achieved With His 197M Gift to Employees Former Journalist, Current PR Guy (wielding an MBA) October 29, 2015 Last week, newly-anointed Twitter CEO Jack Dorsey announced via tweet that he would give a third of his stock options, that39s approximately one percent of the total issuance with a market value of 197 million as of October 28, to all Twitter employees. While he still holds an additional two percent of company shares, this unprecedented act of generosity holds some valuable lessons for leaders. 1. He39ll retain Twitter39s most valuable asset. There are a variety of assets that companies value, including intellectual property, exclusive customer contracts, unique service offerings, proprietary manufacturing technology and business processes or differentiated market locations. Those are all valuable assets but they require employees to maintain, enhance and commercialize that value. Dorsey recognizes that his highly-skilled workforce is Twitter39s most valuable asset in the long term, which is why he gave them the options grant as a retention incentive. An employee39s options grant tends to be broken up into percentage blocks, with each block vesting annually over a set number of years. It39s an effective long-term incentive (LTI) tool that Dorsey selflessly shared to keep his people at Twitter and help keep them happy. 2. He boosts employee morale. A company wide options grant can boost employee morale in at least four ways. First, it gives employees an attainable performance target to align their day-to-day activities toward. Second, it transforms them from company employees into company owners. No one cares more about a company than an owner. Third, it helps instill confidence in employees that they are valued and matter to the broader organization. Fourth, it can inspire a sense of esprit de corps that they39re all in it together. Leaders like Dorsey see the value of engaged and incented employees. 3. He is building a culture focused team. Additionally, Dorsey39s leadership by example sets the tone of conduct across the entire organization. Employees will not soon forget such an uncommon demonstration of generosity towards them. They will understand that teamwork, generosity and consideration of others are all part of the Twitter DNA, and one leader was responsible for setting that tone. 4. He is telling investors they matter. Whether it39s a start-up raising venture capital or a publicly-traded company accountable to its investors, shareholders matter. One of the amazing leadership aspects of Dorsey39s gesture is that his block of options is not dilutive to current shareholders. In other words, Dorsey39s stake in the company was already publicly disclosed, so the amount of his options grant was already factored into the stock purchase decision of existing shareholders who had already bought the stock. However, Dorsey could have just as easily had the company issue a new block of six-to-seven million options for employees that would have been dilutive to shareholders. He didn39t do that but instead pulled from his own resources. That39s a remarkable example of shareholder stewardship and leadership. 5. He burnished Twitter39s reputation. Every leader is responsible for the reputation of the organization. Dorsey39s selfless act has already resulted in a significant amount of positive media coverage and public perception. Whether intended or not, Dorsey39s 197 million gift to his quottweepsquot is a significant deposit in the metaphorical quotBank of Public Goodwill. quot That can only benefit him and Twitter in the future should they ever need to make a quotwithdrawalquot from that account due to an unforeseen crisis or issue. While some may discount or criticize Dorsey39s selfless action claiming he didn39t do enough, the reality is that he didn39t have to do anything for employees. But because he did, he deserves a lot of credit as a visionary leader who cares. Who knows, he might inspire other leaders and CEOs to follow suit. Tor Constantino is a former journalist, speaker, best-selling author and current PR guy with an MBA degree living near Philadelphia with 25 years experience as a profess. Heres A Copy Of Twitters Stock Incentive Plan For Employees Back in 2011 - when Twitter was raising 800 million in investor funding and using some of that to buy back stock options it had previously granted to employees, as a reward for hanging in there - the company filed this disclosure with the SEC. telling the feds how its stock incentive plan works. Naturally, with Twitters S-1 IPO filing expected any day now, that plan has suddenly become interesting again. It tells us how Twitter rewards longtime employees with its own stock. Employees who have been at Twitter the longest now stand to become suddenly very rich, when their stock vests with the public sale. Of course, this is a two-year-old document. Twitters plan may have changed drastically between then and now. But even in 2011, Twitter was a fast-maturing business. It raised the 800 million in part because it wanted to reward employees without having to wait for an IPO. Twitter has raised about 1 .2 billion from investors in total. Some at the company were already thinking about the timing of the IPO even back then. This document, way back in 2011. actually talks explicitly about the prospect of an IPO. Its important to note that this document only covers restricted stock units and not stock options or regular stock awards - meaning that it does not describe all the ways in which Twitter can reward staff with stock. Nonetheless, here are some of the highlights: Twitters stock was classified in eight different tranches or series. By August 2011, 83 employees at Twitter had earned restricted stock units (RSUs). Those RSUs turn immediately into Twitter common stock when the IPO happens. They are better than stock options, the disclosure says, because they do not require the employee to buy a share at a cheap, fixed price and hope that they can sell it at the higher regular IPO stock price, which is often the way options work. (Twitter now has roughly 1,300 employees. according to the LinkedIn count on Crunchbase.) The swap of RSUs for common stock will happen on the day of a liquidity event. Like an IPO. This table, showing Twitters RSU vesting schedule, shows that employees who have been with the company two years or more are going to get the most stock: Employees who have left the company will retain their RSUs: Twitter employees have not been allowed to sell their RSUs on a trading market since receiving them, the letter to the SEC says. The SEC approved the plan, and that approval was the last public financial disclosure Twitter has made. Twitter is reportedly considering offering its IPO stock at about 29 a share. SEE ALSO: Twitter Will Reveal Revenue And Profits In S-1 Filing For IPO As Soon As This WeekFast Answers Employee Stock Options Plans Many companies use employee stock options plans to compensate, retain, and attract employees. These plans are contracts between a company and its employees that give employees the right to buy a specific number of the companys shares at a fixed price within a certain period of time. The fixed price is often called the grant or exercise price. Employees who are granted stock options hope to profit by exercising their options to buy shares at the exercise price when the shares are trading at a price that is higher than the exercise price. Companies sometimes revalue the price at which the options can be exercised. This may happen, for example, when a companys stock price has fallen below the original exercise price. Companies revalue the exercise price as a way to retain their employees. If a dispute arises about whether an employee is entitled to a stock option, the SEC will not intervene. State law, not federal law, covers such disputes. Unless the offering qualifies for an exemption, companies generally use Form S-8 to register the securities being offered under the plan. On the SECs EDGAR database. you can find a companys Form S-8, describing the plan or how you can obtain information about the plan. Employee stock options plans should not be confused with the term ESOPs, or employee stock ownership plans. which are retirement plans.
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