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How do you liquidate money for employees - and is it necessary for employer branding? - Walla! Marketing and digital

2023-05-07T05:40:57.482Z


In the days of economic crisis, difficulty in raising capital and postponement of IPOs, the secondary market became the hot talk in the tech offices. Employees and managers in companies that are waiting for an exit want to liquidate capital and realize ar


Shares (Photo: Giphy)

An innovative model in the secondary worlds (sale of existing shares from one shareholder to another) that has recently developed and is gaining momentum, mainly in the US but is also beginning to make aliyah to Israel, is capital liquidity programs for employees, which are managed by the company itself.

This is how the managements of private high-tech companies cooperate with the employees, with the aim of enabling liquidity events for the shares awarded to them as part of their work.



The share liquidation plan allows those employees to "meet the money" for which they have worked so hard, in an orderly process and at predetermined time points, regardless of the company's decisions regarding its issuance or one exit event or another.

In this way, the exit turns from a one-time event into a cyclical event, which contributes to employee satisfaction and strong employer branding.



Liquidity programs are also what allow startups and high-tech companies to compete for the best talent in the market against huge corporations and public companies, which offer employees significant stock components.

Therefore, it is a very significant tool for retaining employees, talent and senior management, and many companies understand this.


We spoke with Haim Schiff, CEO of the Elephant secondary group, who explained the outstanding benefits of a liquidity plan for companies, entrepreneurs, and above all for employee satisfaction, improvement of conditions, and strengthening of the organization's employer branding.

What are the main benefits of a liquidity plan?

"First, the move contributes to employee retention. Many talents were looking forward to the exit event, in order to exercise their shares and receive a reward for their dedicated work in the organization. As the exit gets further and further away, the plan will allow partial liquidity for the employees - and this reward allows them to be retained, instead of them choosing to migrate to another organization with their options "Out of the money". In addition, the move will demonstrate to them in practice the value of the options they have, and will encourage them to continue investing their best talent in the company. The move helps expand the company's investor base. A liquidity plan is a way to bring in



new, high-quality investors who are the only ones exposed to the liquidity plan These investors can potentially also be part of the company's next fundraising rounds. The transaction gives access to investors who are not in the classic profile that participates in the company's fundraising rounds, but once they enter the company they are definitely potential investors for the future.



Another advantage is the ability of the company itself to price the shares.

When launching a liquidity program, the company can manage the process and define in advance how much liquidity (ie how many options) to allow each seller.

Of course, it is very important to maintain a balance between the granting of liquidity and the preservation of the employee's interest in the company even afterwards - that the employee will have future options to be exercised later in his professional career in the company.



It is important to note that a liquidity plan is suitable for more advanced and mature companies, and that they have a need to be granted liquidity - that is, they need to give air and incentive to employees in a way that serves the company's goals."

How It Works?

Companies that wish to liquidate funds for their employees, based on the options given to them, will operate a liquidity plan in cooperation with the Scandari funds.

In most organizations, the move is carried out together with the human resources department, in the category of employee retention and the set of supplementary conditions in which the employees can be rewarded.

So in fact, the liquidation of the shares becomes a regular and recurring event in the organization, as part of the annual work plan.

The move becomes a significant factor that can be used to reward employees, and one of the conditions that candidates are interested in as early as the job interview stage.

In conclusion, the global secondary market generates tens of billions of dollars a year and is expected to grow significantly in the coming years, all over the world and in Israel in particular.

More and more companies understand the importance of secondary transactions for the long-term retention of the employee, for a rewarding organizational culture and for a strong employer branding that will provide differentiation in front of the many competitors in the market.

In today's economic reality, the employer branding of companies that allow liquidity for their employees will be significantly strengthened along with employee satisfaction.

  • Marketing and digital

  • Entrepreneurship

Tags

  • human capital

  • Employee retention

  • Capital Market

  • stock

  • Options

  • Exit

  • Of money

  • investments

  • Investors

Source: walla

All news articles on 2023-05-07

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