Control Regarding the issue of control, some owners believe it is important to maintain more than 50 percent ownership of the company in order to remain in control. Others believe that control has more to do with leadership than percentage of outstanding shares owned. The differences between these two viewpoints are largely philosophical ones and are best addressed by talking to other company owners who have dealt with this issue.
The issue of dilution is also an important one to understand. Advocates of employee ownership insist that while sharing ownership with employees dilutes current owners' percentage of the company, the increased employee productivity, motivation and retention that can come about with employee ownership increases the long-term value of the company. This, in turn, increases the value of current owners' equity.
It is also important to understand the difference between the percent of shares owned and the economic value of one's ownership position. An owner might dilute his or her ownership percentage over time but, because of the increased value of the company, may enjoy a greater economic value than would be the case without sharing ownership.
Shareholder Rights
Another common concern for many entrepreneurs relates to minority shareholder rights, specifically the rights employees have when they acquire company stock. Concerns about employee rights typically relate to voting of the shares and access to information.
Where the ownership vehicle is an employee stock ownership plan or other indirect ownership vehicle, the Trustee of the plan’s trust is the holder of record for all shares held, and, therefore, the “shareholder” for all legal purposes. Employees in these situations have no shareholder rights that they can exercise directly except as may be specifically given them by the plan’s documents, and even those would have to be exercised through the Trustee.
There are few requirements for private companies regarding employee-shareholder access to information; it is usually the company's choice about how much or how little to provide. But the company needs to balance the desire to restrict financial information with the goal of providing employees sufficient information to help improve company operations.
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