> 2020-03-15

Something to consider:

Equity creates equity in the employees from the point of view of the company.

• Equity: relatively non-liquid asset conveying financial value from dividends and non-financial value from voting rights
• Salary: highly liquid asset conveying financial value on receipt and provides no non-financial value

The former establishes a direct and more-or-less permanent investment in the company by the employee while the latter is available to the employee only through the life of the employment contract.

Flipping to the company perspective, equity treats employees more as fixed assets rather than borrowed resources. If permanence is the goal for a company, given different scenarios require different solutions, options like “sweat equity” agreements may be ideal.

Companies that issue equity to employees receive equity from those employees - a “reverse equity.” Equity is a two-way street.

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