Back during the dot-com boom of the late 1990s, tech companies became notorious for lavishing employees with company stock and options as a form of compensation. The idea was for them to cash in when the firms actually started making money.
The practice looked like a boon for a generation of young techies as internet stocks soared. Unfortunately, when the bubble burst in the early 2000s, many saw their newfound fortunes vanish almost as quickly as they had accumulated them.
Twenty years later, tech giants still lean on stock grants to supplement their compensation packages. In turn, their employees are showing signs of being more willing to use their equity stakes to have a say in the future of the companies.
In what is believed to be the first employee-led shareholder proposal of its kind, a coalition of Amazon workers have filed petitions requesting the company come up with a plan to cut its use of fossil fuels and to address climate change. Amazon’s shareholders will vote on the proposal at its upcoming annual meeting.
In a similar vein, Google employees joined a shareholder petition in 2018 calling for tying executive compensation to diversity and inclusion benchmarks. You have to wonder if this is what industry titans had in mind when they turned stock packages into a de rigueur feature of working in tech.
Stock compensation offers a few notable advantages for employers. First, it enables companies to hold onto cash to invest in their businesses, a major plus in a speculative field. As seen during the dot-com bubble, startups used this as a way to fund their enterprises during initial growth phases.
Additionally, stock packages are often billed as motivational tools that connect employees to the success of their employers. In other words, they share directly in the gains when the company’s value grows.
But consider the upside-down power dynamics if employees gain a large enough share of their company’s total equity to become a powerful voting bloc among shareholders. What happens when their bosses have to answer to them? Even if employee shareholders don’t control a meaningful number of votes, their visibility can still have a persuasive impact on other influential investors.
On the other hand, when employees take the time to raise a shareholder proposal about climate change, it probably speaks to the importance of the issue to both current and prospective workers. Not to mention, the people on the ground floor – both literally and figuratively – can often paint a compelling picture about the health of a company via the knowledge gleaned from their everyday job responsibilities.
In the end, forward-thinking management teams will probably come to find that they can learn a lot by listening to the employees with long-term stakes in their companies.