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A Conceptual Guide to Equity-Based Compensation for Non-U.S. Companies

by Corey Rosen

$25.00 for NCEO members; $35.00 for nonmembers

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In recent years, there has been a dramatic increase in worldwide interest in employee ownership. This expanding interest has not been met by a growth in resources to help company leaders, employees, government officials, and business advisors understand how to think about ways to implement these plans, however. This book is an effort to help meet that need. It is not an effort to detail the specifics of country-by-country laws. Instead, it is a more conceptual volume, one that is intended to help businesspeople and government officials outside the U.S. think through the various considerations that would go into to setting up an effective employee ownership plan in their own country. Who should get stock? How much should they get? How should they acquire it? How can stock be valued in companies not on a stock exchange? How can employees be assured that they can sell their stock down the road?

Publication Details

Format: Perfect-bound book, 110 pages
Publication date: March 2001
Status: In stock

Contents

Preface
Employee Ownership Concepts and Models
Making Employee Owners
The Scope and Development of Employee Ownership Worldwide
General Considerations for All Stock Programs
Creating an Ownership Culture
Setting a Price on Company Stock
Final Thoughts on Establishing an Employee Ownership Plan
Glossary

Excerpts

From Chapter 1, "Employee Ownership Concepts and Models"

By far the most common method for representing ownership is stock. Companies create stock because it provides a flexible way to represent units of ownership in the company. Laws, stock exchange rules, and customs in different countries, however, create a wide variety of ways in which stock can be created, held, repurchased, and structured.

In most cases, companies can assign different rights to different classes of stock, although their ability to do so may be constrained by corporate bylaws, national securities laws, or stock exchange rules. Most shares of stock are "common" stock, stock that carries voting rights, whose value fluctuates in direct proportion to the overall value of the company, and that may or may not carry specified dividend rights. "Preferred" stock gives its holders certain preferences, typically to liquidation rights (these owners are first in line to be paid after any creditors are paid should the company not be able to meet its financial obligations) and dividend rights (preferred shares usually pay a higher dividend). In return for these rights, preferred shares may not carry voting rights and usually fluctuate less in value than common stock. That is because owners of preferred stock have a higher claim on the current earnings of the company; hence they have a lesser claim on the terminal value (value of the company at sale or liquidation) of the company. Preferred shares almost always cost more than common stock.

Within these familiar forms of stock, companies in many countries have created more innovative approaches. For instance, some companies have "super common" stock, common stock with enhanced dividend or voting rights. Like preferred shares, purchasers of these shares have to pay more for the additional privileges. Companies might also create "tracking" shares, shares whose value fluctuates with a particular line of business of the parent company. National securities laws or stock exchange rules, however, may limit the ability to issue such shares.