Ownership in Firm, With a twist 2

[OSUCivlEng]

Ownership at the firm I work at is a bit different than most places that I am aware of, shares are simply given to you, as opposed to buying in. After talking to a few people, my understanding is that it's more of a way to add additional compensation to certain people without giving them a salary increase. Otherwise, the billing rates would be all messed up. The additional compensation is in the form of quarterly dividends paid out to owners. From what I can tell, there is much smaller group of owners who form a board of directors and actually make all the decisions. The rest of the owners are outside this group and have no real decision making ability on how the company is run. I imagine the larger group of owners is selected for the performance. I should also add that very few people know who all the owners actually are. It's kept somewhat secret, especially from the rest of the employees in the company.

About two years ago, I was told by the President of the firm I work for that I was going to be made an owner immediately. There were not any free shares at the time, so I would be given equivalent shares. There is no documentation of this, and my understanding was that this was the first time it had been done like that. I was given some very small quarterly distributions for the first year. Then some changes in tax laws stopped all distributions to all owners.

It has been two years and I have not received any documentation of my supposed equivalent shares, nor has there been any further discussion of it. At first I didn't really think much of it, because it was essentially a gift and I didn't have to pay for anything. The longer this has gone on though, the more I find myself questioning if this was some kind of carrot to get me to stay. I am trying not to become bitter about it, but the more I think about it the more it seems like it wasn't genuine. I am trying to figure out how to address this and ask questions without being too pushy or coming off as a jerk. Any suggestions?

 

[LittleInch]

It does sound like the company use dup all its non allocated shares and now no one wants to go through the pain of having to create more shares as this would "dilute" everyone else's shares ands there may be clauses saying if this happens, all the other shareholders have a right to keep their percent of the shares by buying more ( It's called pre-emption" rights I think).

Given that there are only so far two of you affected, my guess is that this is all a pain and an expense which the other owners / shareholders or at least the mgt team, don't want to go through.

That's not your fault / problem, but if this promise is only verbal, it might be difficult to enforce, plus you still like working for them.

But asking the question and how the response goes will tell you lots about whether they acknowledge the offer or not.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[OSUCivlEng]

They said they didn't have them available at the time (fair enough - there's a finite number and perhaps they didn't want to or are not able to dilute them), so they gave you a bonus in lieu of shares.

My understanding is they pay quarterly dividends based on how many shares you own. I have confirmed this with other shareholders. However, those dividends do not have taxes withheld.

Best I can tell, it looks like the I was paid ~10% of what a dividend would be and this had taxes withheld, so it just went down as a bonus. Again, those percentages are based on conversations with other owners.

I'm still receiving the normal bonuses that I was in the past. However, it looks like my total compensation is beginning to flatline.

But yes, I agree, it looks like management doesn't care for it's employees and they made a promise they can't keep. I agree I need to have the conversation, but I am not optimist. I am feeling pretty screwed over at the moment. Trust me, I have been looking and talking with other employers.

 

[AZPete]

Don't act in the classic engineer fashion and overthink this. Instead, do your best imitation of a regular employee and go to the nearest HR or management person and say, "I supposedly have shares in the company, but I have no documentation. I am confused as to what I may own. Who can clear this up for me?"

 

[glass99]

"Pacman" engineering consultancies like WSP believe that the engineering market is headed for a consolidation ala accounting. The WSP CEO believes that where will be 4-5 500k employee engineering firms in 10-15 years

At an instinctive level I completely agree that the "Pacman" model stamps out a lot of the creativity, color, and niche expertise that a constellation of smaller firms can provide. I sell that to clients every day when they have hit a wall with some conservative and bureaucratic big firm, and I get to swoop in with out of the box solutions. We have gotten some really sweet chunks of big projects that way. But I also like having the idea I can cash out one day...

 

[CWB1]

CWB1 I disagree with your take on an ESOP. I work at an ESOP company. It's incredible. Engineers that start at my company out of college retire in their low 50's....our share price is not set by management. It's determined by a 3rd party accounting firm.

ESOPs can be beneficial and I'm not trying to disparage them, simply pointing out the potential downside to variable compensation. At one extreme are successful startups where ESOPs can make employees extremely wealthy within a few years. At the opposite extreme is a failing company, the ESOP is approaching $0 value and employee paychecks are smaller than peers' elsewhere bc part of their compensation is that ESOP. Given two similar compensation packages most folks will choose traditional salary&benefits over an ESOP (or commission, or other variable schemes) because there's less risk with a defined salary. Moreover, bc ESOPs are a scheme to minimize costs during downturns they tend to be used in companies at the extremes, startups and dying dinosaurs, so there's also a bit of a stigma to them.

You're correct in that valuation is always 3rd-party but it relies heavily on data provided by management about assets, liabilities, and forecasts which is commonly subject to manipulation, so its better to be mistrustful than not.

IME most engineers can afford to retire around age 50 and I'd guesstimate half of those I've worked with did so. The other half simply enjoy working, enjoy a large paycheck, and have plenty of vacation time so choose to keep on. A favorite gripe of mine is actually that most stop keeping-up with software tools and technology around age 50, choosing to coast the last decade bc they dont care if they're forced-out.

 

[LittleInch]

What is a "pacman" model??

Googling it just brings up about 100 companies with that in their title....

CWB1. I know what you mean. I'm prob one who enjoys it too much but nowadays I really really don't give a sh1t about a lot of things and if someone decides they don't like me and kicks me off the job for pointing out that their design is terrible then so be it.

But I still like finding new things and issues to work on.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[TigerGuy]

A pacman firm is a corporation that runs around gobbling up (buying out) all kinds of smaller local firms, thus creating a behemoth firm with thousands of employees. Often, this consuming monster has decision makers in one location that try to dictate how everything is done at each location and ignoring the idea that each market is slightly different.

Not all behave in that manner, but even small firms with a couple of branch offices can get tripped up with what works in one location not working at the next office 20 minutes away.

 

[LittleInch]

Ah, now I get it.

God that sounds horrible.

I've been around long enough to see more than one crash and burn. Kvaerner was one.



Remember - More details = better answers
Also: If you get a response it's polite to respond to it.