Stock-purchase plans give employees a piece of the action

///Stock-purchase plans give employees a piece of the action

Stock-purchase plans give employees a piece of the action

Small companies will go to great lengths to attract and keep good employees. Some will entice the best and brightest with a daily spread of fresh fruit or the ever-popular foosball table in the break room. Some even offer unlimited vacation as an incentive to stay.

But others reward employees with a piece of the company through employee stock-purchase plans. Messagepoint Inc., a Toronto-based business software provider, turns its employees into owners by issuing shares to all 100 staff members. “We wanted this notion of employee-owners – staff who legitimately felt that they would have a say and would treat this place like a piece of it belongs to them,” says Messagepoint chief executive officer Steve Biancaniello.

The company introduced the share plan as it launched its software in the depths of the 2008 global market meltdown. The financial crisis nearly froze business spending around the world and Messagepoint was forced to impose a 5- to 10-per-cent wage rollback.

To keep employees from fleeing to other companies in the highly competitive Southern Ontario technology industry, Messagepoint decided to compensate its workers with shares in the firm. “That was the thing that held a lot of our employees from running for the doors,” says Mr. Biancaniello.

Under the plan, shares are issued monthly. The number of shares each employee receives is based on seniority. Employee-shareholders have between one and 10 years to cash them in. Messagepoint is a private company and its shares do not trade publicly.

The value of the shares is determined several times a year by a third-party accountant. Mr. Biancaniello says that some employees have seen their shares quadruple and even quintuple in value.

The share plan is especially useful in attracting millennials with fresh ideas, he says. “For us it was about wanting to attract a certain type of talent using this additional form of compensation.”

In addition to motivating employees, Mr. Biancaniello says the share plan provides financial flexibility for the company. “When you give out options and you complement that with salary and other perks, the option part does allow us to preserve some cash and reinvest that back in the business,” he says.

Read more: Stock-purchase plans give employees a piece of the action – The Globe and Mail