Steve Jobs owned 11% of Apple Computers (7.5 million shares) when it went public in 1980<\/li>\n<\/ul>\n\n\n\nThe point here being that founders of a company always “cash out” a little during the IPO.<\/p>\n\n\n\n
In the era of “venture capital” those early investors goal is probably “IPO cash out” – which is always a high risk and high reward proposition.<\/p>\n\n\n\n
HOWEVER for “founders” the IPO “cash out” is obviously important but not THE MOST important element of founding the business.<\/p>\n\n\n\n
Of course the money is important – but once they have all the money they will ever need it ceases to be prime motivator.<\/p>\n\n\n\n
What DOES motivate those founders after an IPO? Well, probably the same things that motivated them BEFORE the IPO.<\/p>\n\n\n\n
The folks that actually knew Steve Jobs would point out that he saw technology in general (and Apple computer in particular) as a force for positive change in the world.<\/p>\n\n\n\n
The Google Boys were inspired by solving a problem – they didn’t set out to change the world, but did. The “history of the internet” could be divided into “before Google” and “after Google” …<\/p>\n\n\n\n
Mark Zuckerberg had Steve Jobs and Bill Gates as “tech entrepreneur” roll models – so he comes across as being the most “monetary motivated” of my selection – he still has “problem solving” and “world changing” as motivators <\/p>\n\n\n\n
fwiw: The book that served as “source material” for the “The Social Network” movie was titled “The Accidental Billionaires” (2009 Ben Mezrich) – the book was interesting – I still haven’t seen the movie …<\/p>\n\n\n\n
Insider Trading<\/h2>\n\n\n\n
AFTER the IPO if “insiders” sell shares they have to report that sale within two to four business days – well, that is required by the Securities Exchange Commission in the U.S. – I’m guessing stock exchanges in other nations have similar requirements.<\/p>\n\n\n\n
The intent of a large number of SEC regulations is to protect the integrity of the various stock markets. After all if the stock is trading in a public market – then “insiders” could easily manipulate the market to increase (or decrease) the public share price.
Which makes the timing of “founders” selling their shares actionable intelligence for savvy investors. <\/p>\n\n\n\n
IT ALSO means that an insider even appearing to accidentally manipulate stock prices something the SEC is going to notice.<\/p>\n\n\n\n
Employee Stock Options<\/h2>\n\n\n\n
Total “executive compensation” REALLY took off when companies started offering “stock options” as part of executive compensation.<\/p>\n\n\n\n
The theory is that that the publicly traded stock price directly reflects the companies value\/performance. Then if the stock price goes up the people running the company must have done something good. Makes sense – it absolutely isn’t true 100% of the time but it has become common practice<\/p>\n\n\n\n
Explaining EMPLOYEE stock options is a two drink exercise – short form – when a company grants “stock options” to a employee those options probably have a fixed price and a vesting date –<\/p>\n\n\n\n
e.g. imagine “bigwig ceo” gets “x” number of stock options at a “price” and can exercise those options after a “certain period” of employment time –<\/p>\n\n\n\n
if those stock options were granted at $1 and the vesting time is 4 years – the employee can “exercise” the option at whatever price the company stock is trading after 4 years – SO if the stock price went UP the employee has a valuable asset BUT if the stock price went DOWN the options are worthless<\/p>\n\n\n\n
Remember – the point of “stock options” is to align “employee motivation” with “company outcomes”
A reasonable person might think that working for the “best interest” of the company is always a given – but that is only part of the equation. <\/p>\n\n\n\n
I like to point out that if an “executive” is doing their job well – then it is hard to pay them TOO MUCH. Just like if “executive” is treating the company like their personal piggy bank – then it is hard to fire them fast enough …<\/p>\n\n\n\n
Steve Jobs was getting $1 a year as CEO of Apple from his return in 1997 to his 2011 resignation. Of course there is more to the story – he also accumulated 5.5 million shares of Apple stock as compensation – which he left to his wife when he died making her one of the wealthiest women in the world (over $11 billion).<\/p>\n\n\n\n
Startup stock options<\/h2>\n\n\n\n
The “legend of Apple Computers” includes former Apple employees with stories of being offered the choice between “Apple stock” or “cash” – and they chose the cash.<\/p>\n\n\n\n
These stories are (probably) not ALL true, but they are plausible. i.e. startups are ALWAYS short on “cash” but granting stock options is probably cheap and easy.<\/p>\n\n\n\n
Of course if the startup fails the stock is worthless – and if the startup becomes “Apple” then those shares could have been worth $millions.<\/p>\n\n\n\n
Part of the “Google” story involves the fact that they gave stock options to a lot of “ordinary” employees – e.g. when Google had their IPO they had ~2,300 employees and ~1,000 of those folks become $millionaires after the IPO<\/p>\n\n\n\n
of course founders Larry Page and Sergey Brine had a lot more stock then those folks and become $multi-billionaires<\/p>\n\n\n\n
I’m gonna guess that those “ordinary employees” – working in building maintenance and the company cafeteria – PROBABLY quit their jobs. Then the highly qualified folks Google hired after those folks quit probably got a stock ownership option.<\/p>\n\n\n\n
i.e. the solution to the growing gap between “executive compensation” and “ordinary employee wages” could include “ownership” options. Obviously there is no “one size fits all” solution …<\/p>\n\n\n\n
Then there is Elon Musk …<\/h2>\n\n\n\n
All this came to mind because of the Elon Musk hit-piece documentary that is trying to portray him as a stock manipulator – which is specious at best-<\/p>\n\n\n\n
I’m not sure how many companies Mr Musk has started – but that is his “secret to success” – i.e. he is a “serial entrepreneur.” <\/p>\n\n\n\n
He earned $22 million for selling Zip2 to Compaq back in 1999. Then another $180 million when eBay bought PayPal in 2002.<\/p>\n\n\n\n
The Tesla story is “messy” – but he is a big part of it one way or another. The Tesla board of directors and shareholders wanted to keep him around – so they came up with a (potential) $trillion compensation package that is loaded with performance objectives over 10 years.
Is Mr Musk worth $trillion to Tesla? That isn’t really the issue – but if he manages to meet all of the performance then the answer will be “yes.” <\/p>\n\n\n\n
How likely it is that he WILL meet all of the objectives? I have no idea. I’m only interested as an observer – so I wish him luck …<\/p>\n","protected":false},"excerpt":{"rendered":"
… back during the “dotcom” boom and bust the way companies “expensed” stock options became an issue This was actually one of “case studies” when I was doing the MBA thing. The details are something that accountants might find interesting – e.g. the big picture question was if “back dating stock options to retain employees” […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,4,9,16],"tags":[],"class_list":["post-1145","post","type-post","status-publish","format-standard","hentry","category-business","category-computers","category-leadership","category-technology-history"],"_links":{"self":[{"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/posts\/1145","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=1145"}],"version-history":[{"count":3,"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/posts\/1145\/revisions"}],"predecessor-version":[{"id":1148,"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/posts\/1145\/revisions\/1148"}],"wp:attachment":[{"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=1145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=1145"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/iterudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=1145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}