“Take ownership”? Give ownership!

Written by James Hirsch

Employee ownership can make a real difference. What is your organization doing?

Like many mainstream industries, the cannabis space is aflutter with statements committing organizations to DEI (diversity, equity and inclusion) and ESG (environmental, social and governance—or as we have heard recently, “every single gripe”).

Though proponents of DEI and ESG seek to address legitimate concerns, actual results from vague commitments to social equity are not readily quantifiable, as many actions any single individual or organization might take to “take ownership” of problems as large and amorphous as global climate change and systemic racism are unlikely to be effective at making a positive and lasting difference in the life of any person alive today.

Employee ownership through equity compensation, however, is different. It is a specific goal every company can commit to and advance towards right now, and it is something that can make a real difference in narrowing wealth and income gaps in our society by affecting positive outcomes close to home—i.e., in the lives of your employees. It can also be good for business by increasing employee engagement and retention.

While equity compensation is not a new idea (it has been around for centuries), challenges to creating and maintaining a successful equity compensation and employee ownership program are numerous and complex. However, it can be well worth the effort—for your company and society at large. Skeptical? There are numerous studies showing positive links between employee ownership, corporate performance and better economic outcomes for employee owners. The National Center for Employee Ownership (“NCEO”) reports on studies showing— for example—productivity increases from 20-33% for public companies implementing broad- based stock option plans over otherwise comparable firms (with medium-sized companies at the higher end of that range), and substantially higher household net worth and longer job tenure for employee owners in various categories, including low-income workers, workers of color and single parents.

Also, note that interest in and awareness of employee ownership is growing. A new organization founded by leading private-equity firms called “Ownership Works” has just launched with the goal of promoting and facilitating broad-based employee ownership and financial literacy as keys to wealth creation for lower-income employees.

Equity compensation can be delivered in a number of different forms, including stock options, direct equity grants, restricted stock units or other so-called “phantom equity” plans, all of which can be structured to promote retention and the achievement of specific objectives that are important to your company’s success.

We’re curious about what you think of employee ownership and how you approach equity compensation as a business operating in the cannabis industry. Do you grant equity primarily as a substitute for cash compensation, including to advisors and other service providers? Do you

have a comprehensive and well-thought-through plan to incentivize employees at all levels in the organization? Or do you take a more ad hoc approach focused on executives or other key employees? Do you tailor equity incentives to specific individuals, roles and performance metrics, or do all awards follow the same model? How do you document, communicate about and administer your plan? How well do participants understand your plan? Have there been any surprises? If you are an executive or employee, what is your experience with equity compensation?

If you’d like to discuss your existing equity compensation arrangements or learn more about employee ownership—in the C-suite or at all levels of an organization—please reach out to FLA to start a conversation about this important topic.