Jack Dorsey, the new Chief Executive for Twitter, has made a bold move. He has put a third of the entire company’s stock into an equity pool for employees. This has been seen by experts as a very smart move, as it may just be what is needed to get confidence in the company back up. Recruitment and compensation experts have responded by saying they believe this may just help the company find its way again.
Naturally, the gift is very generous but it is also clearly a strategic move. The Twitter exodus is still in full swing and the new equity pool may just be what is needed not just to attract key talent, but to retain it as well. Considering the months of questions about growth and leadership, this has been a necessary move. One recruitment expert, Jason Hanold, who places top managers and executives in the tech industry, has welcomed the move.
It’s a deliberate and wise and somewhat necessary move to shore up the talent you want to keep.
Dorsey has been temporary CEO of Twitter for some time now and was given the position permanently early this month. He made the stock announcement late last Thursday, and it came as somewhat of a surprise. After all, donating $206 million is a significant gift, even if it represents just 1% of the overall company.
I’m giving 1/3rd of my Twitter stock (exactly 1% of the company) to our employee equity pool to reinvest directly in our people.
The move had an immediate effect. Over the past six months, shares in Twitter fell in value by 44%. However, 24 hours after Dorsey’s announcement, they were up by 3.9%.
While the announcement came as a surprise, it was clearly not a spur of the moment or individual decision. Other expert companies had been expecting something to happen that would give Twitter an instant boost. One expert outside of Twitter who immediately responded is executive compensation data firm Equilar’s director of content and marketing communications Dan Marcec.
The move was designed “to instill confidence in investors and employees to show he’s trying to do the right thing for the company.”
Just last week, Twitter announced that some 8% of its staff would be laid off. This, again, was not entirely a shock announcement, but it did rock public confidence in the company once again. As such, it is clear that Dorsey would need to do something to keep his remaining employees happy. After all, someone who makes the decision to lay off that amount of staff members will not generally be popular.
Some 6.8 million common shares will now be transferred. This is still subject to approval by stockholders in 2016, however. An equity incentive plan has been prepared, which shows the shares will be granted to Twitter employees ‘over time’. So far, the deal has already been approved by the board, which means stockholder approval is most likely just a technicality.
Since the announcement, various experts have commented on the move. Besides Jason Hanold and Dan Marcec, others also had something to say about it. These include Senn Delaney’s CEO, Jim Hart.
Jim Hart, CEO of Senn Delaney, that advises companies on how to figure their cultures, pronounced Dorsey was regulating his shares to radically ask pivotal employees “to stay a march with me.” He cautioned a additional collection would not take a place of Twitter regulating a company’s business model, and if a shares decline, a gesticulate could tumble flat.
The move is clever for a variety of reasons. Because there is now an extra cache of stock, it may be that Twitter has avoided the need to actually issue new stock to hand out, which employees could purchase as options. In so doing, investors’ stock holdings are not diluted. Diluting existing stock tends to lead to a significant drop in value. Clearly, with the 3.9% rise in share value, this potential crisis has also been avoided. However, it must be said that this rise only happened one day after the announcement, after which the markets closed for the weekend. The true test will come when they reopen.
It is also believed that not all staff members will be able to get their hands on the stake released by Dorsey. Rather, it will be used as an incentive to keep employees who are being headhunted with the company. Since Twitter is still reeling from the exodus, this is yet another very smart move.
Worth approximately $200 million, the move comes after Twitter suffered an exodus of a number of high-profile employees, with the majority of the firm’s management team resigning or replaced.
Last July, Twitter admitted that their monthly user growth was the slowest it had ever been since 2013, when the company went public. This has angered shareholders and board members alike, and has led to various high profile executives within the company leaving to go elsewhere. Besides top executives leaving, a further 8% of staff will be made redundant, which means Twitter clearly is struggling.
However, since Dorsey officially returned as CEO to the company, he has been working hard to bring the public image of Twitter back into a more positive light. He has announced a range of new initiatives to make the platform more interesting once again. The latest announcement designed to attract new users is the Moments feature, with the new Rocky movie ‘Creed’ being the first to be featured on this.
Twitter’s Moments represents a major effort by the social media company to reverse sluggish user growth, and for the fact that it relies on human curators. This reliance on human expertise raises important questions over the value of people in tech-driven information services.
Moments will show users ‘the best of what’s on Twitter’ and will look at things such as news, today, entertainment, sports and fun. Moments did immediately attract a lot of attention, which is needed as the company is struggling to get sufficient advertisement revenue.