In academia when you read a bunch of things and then put them together in a paper the opening paragraph usually states that it’s a “survey and analysis”. I guess that’s what we do here at Peluso Presents on Thursdays. We do a Survey and Analysis of different things that seem unrelated but make sense, that can provide input to the discussion of this blog or provide something to think about.
I’ve discussed how Gamasutra is a very big influence of mine. Gamasutra is the preeminent home to conversations for and about video game creators. In a classic case of where the video game conversation crosses over to the work of this blog, this week I came across an article that dances around a subject that I believe is part of the solution to the needs of the greater workforce. Specifically the subject is equity sharing.
In the gaming world the industry is going through a transition. We are in the age of the indies, or independent game studios. They have always existed but with platforms like iOS and Android, as well as the indy friendly restructuring of the big traditional platforms like Microsoft’s Xbox and Sony’s Playstation there has been an explosion and implosion of the scene. Since indies tend to be founded cash poor but creativity rich, the best way to get a company up on a shoestring was to share equity. In short, everyone is an owner and shares in the success or failure of the game they created. That becomes a problem in the same way we experienced as kids working on a group project at school. How does the hardest worker in the group get the A while the kid who did nothing get an F? When you start a company, it’s not about a letter of the alphabet, it’s about the color green. That makes the conversation a bit more intense.
The Gamasutra article goes on to review options to split equity in different ways. Some of which are used in corporate america. The most interesting to me is the one that isn’t really used all that much, the dynamic split. For full disclosure I haven’t read Slicing Pie, by Mike Moyer which is cited in the article. Just based on the description I can see where the model would work well if it could be figured out for a large organization. You have the insane 24/7 worker who’s working 100% of her waking hours, then guess what, she get’s a higher piece of the equity pie. You got a dad who wants to do a great job from 9-5 and go home and play with his kids on the softball league, then they get commensurate equity share based on their contribution. Today’s data infrastructure could help out with managing all that. The best part is that they both get equity, they share in the organization’s growth and wealth. They also get different rates at different times based upon their ability to contribute.
When Bill Clinton championed the changes in tax code that allowed CEO pay to be tied to performance, the corporate boards all equated corporate success to stock performance. Ultimately the CEO’s all drove massive increases in compensation with stock options. One way to increase the stock price was enhanced profitability by cutting out the middle layer and pay people as little as possible. If that’s the way of business moving forward so be it. The key to balance it out as I’ve argued for over and over, is for that same type of equity growth be shared by all employees at the same ratio of the executives. If a CEO Makes 1 million/year salary, and is granted 1000 shares a month, then a Individual Contributor who makes 50K, needs to get 50 shares a month. If that 50 shares a month goes up to 80 because someone is putting in ungodly amounts of hours (say they travel 3 weeks out of every month), they get just compensation. In a world of dynamic split, someone who’s putting in just 40 hours but has a critical in-demand skill, say electrical maintenance in a highly automated factory, they are at a higher rate. If the company only wants to pay 30K a year for a job that should pay more, then at least their is a greater cash out after the next rightsizing.
I know people will argue we do this already with stock options in certain industries. What i’m discussing is that it becomes formalized across all business and industry in the same way that it’s common in the games industry’s indy scene. In a perfect world when a new hire comes on board when the conversation about retirement and healthcare happens then equity sharing should be just as highly placed. Again, yes, I know it exists for professionals with stock options, but those options should be shared by everyone. It shouldn’t be a tech startup where an engineer or secretary can retire after 20 years with an amazing level of wealth. Everyone should share in the wealth, and everyone should share in the decisions that affect a large swath of the employee population. Then balance gets restored. It’s won’t be kids fighting over Sega being able to do what NintenDon’t. Everyone will just play videogames together. Now wouldn’t that be fun?
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