Rosen is quick to point out that giving employees equity does not automatically result in higher profits or better stock performance. Over the past 10-years a sampling of some of the best known (non-tech) companies that pay in stock have outperformed by a wide margin – His research has found that stocks of public companies that spread ownership broadly perform better than companies that don’t. Investors generally prefer that a company spend $1,000 in stock rather than in cash, though Rosen notes the two are technically economic equivalents. This is a way to augment cash compensation that doesn't draw down the company’s cash reserves.” “Even if you are a publicly held company you only have so much cash at your disposal. It’s also a way to compensate employees that doesn't require cash, points out Baksa. The 1991 letter CEO Howard Schultz sent announcing Bean Stock to Starbucks employees. Schultz figured seeing the same – happy – faces everyday would help differentiate his company. There are lots of places to buy good coffee. Starbucks, for example, claims to have a retention rate "well above the industry average." According to the Bureau of Labor Statistics retail broadly has a 30% annual turnover rate. There is evidence the practice improves worker retention, which cuts turnover costs and arguably improves customer experience. If employees own stock, and particularly if the executives own stock, then presumably they will also want the stock price to grow.” "The shareholders want the stock price to grow. “It helps align the employees with what the shareholders want for the company," says Barbara Baksa executive director of the National Association of Stock Plan Professionals, a network of HR professionals that deal with stock compensation programs. When done right, employee ownership has been shown to boost earnings and improve stock performance. On the other hand for all its feel-good, inclusive shtick even Starbucks isn't doing this solely out of the goodness of its corporate heart. You’d be hard pressed to find a CEO who would call economic growth and wealth distribution bad. “Here is a way you can move wealth into the hands of more ordinary people that isn't taking wealth away from anybody else - in fact it is creating more wealth,” he says. He has spent the last 35 years researching and promoting the concept. Helping draft legislation on employee ownership plans Rosen came to see the practice as a pure expression of capitalism that was not well enough understood. “It’s a win-win thing,” says Corey Rosen, who founded NCEO in 1980 after a stint as a Capitol Hill staffer. Starbucks' stock program is unusual in the range of employee levels it covers it grants Bean Stock to 83,000 workers from your local part-time barista up to directors (more senior staffers also get stock but under a different model). This figure includes roughly 9 million people who receive some portion of their pay in equity as well as folks who buy stock through employee-only deals or whose employers match retirement savings with company stock. The National Center for Employee Ownership (NCEO) estimates that around 28 million employees - about 20% of America's non-governmental workforce - participate in some kind of employee stock ownership program.
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