As employees form the backbone of all businesses, how do you ensure that you retain your best performers?
ESOPs, which in some cases relate to the offering of shares to previously disadvantaged individuals for B-BBEE purposes and in others, to senior managers as a retention mechanism, present an extremely effective mechanism to incentivise employees to think and act like owners of the business. ESOPs further provide an exit strategy for the existing owners who can, over time, sell all of their shares to employees of the business.
We continue to advise clients on suitable employee compensation schemes across a broad range of industries.
We are acutely aware of the fact that one size does not fit all when it comes to employee share ownership.
However, there are risks associated with an ESOP.
While ESOPs have the potential to create immense value in a privately owned business, they can also create a host of challenges for management. If not set up and managed correctly, ESOPs can prove to be, at best, a major distraction for management and, at worst, a source of significant value destruction.
Our approach to ESOP advisory is unique in that we consult extensively with all stakeholders to ensure that the scheme is fair to all parties, thereby ensuring that the ESOP will continue to create value in the long-term.
At Crest Capital, we design and implement ESOP structures which achieve the owner’s objectives of incentivising key employees in the long-term while providing a seamless exit plan, by being cognisant of the needs and concerns of all stakeholders, including existing owners, management and the members of the ESOP.
Having been engaged as an external advisor to resolve disputes which have resulted from poorly designed ESOPs, the Crest Capital team is acutely aware of the fact that the valuation mechanism employed in an ownership scheme needs to be robust, transparent and consistent.