WEBVTT - "Wealth doesn't come from wages” 0:00:00.960 --> 0:00:05.040 Our expectations around wealth and work are changing. For decades, 0:00:05.080 --> 0:00:07.280 you would earn a salary, take it home as your 0:00:07.320 --> 0:00:10.000 reward and use that to build your long term wealth. 0:00:10.560 --> 0:00:13.399 But is salary alone still enough to get you where 0:00:13.400 --> 0:00:15.520 you want to go? And could it be just as 0:00:15.600 --> 0:00:18.200 rewarding to have a real state in the work that 0:00:18.239 --> 0:00:22.040 you're doing. I'm Laura Marwick and I'm here with Susanna 0:00:22.079 --> 0:00:25.600 Batley of Chezy's Business and Andrew Morrow of Parts Trader, 0:00:25.880 --> 0:00:29.600 recently acquired for six hundred and fifty million dollars. We're 0:00:29.600 --> 0:00:33.479 going to ask them about ownership opportunities and how people 0:00:33.720 --> 0:00:34.680 really want to get paid. 0:00:35.280 --> 0:00:37.879 Investing involves the risk you might lose the money you 0:00:37.920 --> 0:00:41.199 start with. We recommend talking to a licensed financial advisor. 0:00:41.920 --> 0:00:45.760 We also recommend reading product disclosure documents before deciding to invest. 0:00:46.000 --> 0:00:48.400 Everything you're about to see and here is current at 0:00:48.400 --> 0:00:49.279 the time of recording. 0:00:49.600 --> 0:00:51.440 Sus and Andrew. Welcome to shed lunch. 0:00:51.600 --> 0:00:52.479 Thank you, Thank you. 0:00:52.840 --> 0:00:56.960 Sus So. Cheesy's has recently conducted some research that showed 0:00:57.000 --> 0:01:01.040 that eighty percent of respondents see that they would take 0:01:01.120 --> 0:01:03.960 at least part of their remuneration in shares if they 0:01:03.960 --> 0:01:07.039 were given the opportunity. What does that kind of say 0:01:07.080 --> 0:01:10.160 to us about these changing expectations about the way that 0:01:10.160 --> 0:01:11.000 we're compensated. 0:01:11.520 --> 0:01:14.840 Yeah, well, I think you said it. Expectations are changing, 0:01:15.040 --> 0:01:18.320 and I think when you look at a range of 0:01:18.319 --> 0:01:23.200 factors that are converging, it's no surprise employees are looking 0:01:23.200 --> 0:01:26.640 at their pay and saying, actually, while this is important 0:01:26.640 --> 0:01:28.319 for paying the day to day bills, it's just not 0:01:28.480 --> 0:01:30.880 enough to build long term wealth. And in fact, when 0:01:30.920 --> 0:01:32.920 we look at data over a long period of time, 0:01:33.640 --> 0:01:37.959 wealth development does not come from wages. It comes from ownership. 0:01:38.360 --> 0:01:41.440 And I think employees are really spotting that and looking 0:01:41.480 --> 0:01:43.440 at what levers they can pull in order to make 0:01:43.480 --> 0:01:45.840 sure that they can build wealth over long periods of time. 0:01:47.280 --> 0:01:49.960 Actillary has sort of been like the definitive way to 0:01:50.200 --> 0:01:53.040 build your wealth for a really long time. Why do 0:01:53.040 --> 0:01:54.600 you think that people are kind of coming to this 0:01:54.680 --> 0:01:55.720 realization now? 0:01:56.640 --> 0:01:59.120 Yeah, Well, a few things. One is that cost of 0:01:59.160 --> 0:02:03.440 living has increased substantially. And when we look over decades, 0:02:03.840 --> 0:02:08.000 capital markets have produced enormous wealth, but that hasn't necessarily 0:02:08.040 --> 0:02:11.959 flown through two wages. So, for example, let's take New Zealand. 0:02:12.200 --> 0:02:17.680 Since nineteen eighty, the stock market has produced returns of 0:02:18.560 --> 0:02:22.320 or has increased by almost forty times, whereas wages have 0:02:22.440 --> 0:02:26.000 increased around eight times. So you're seeing a massive divergence 0:02:26.040 --> 0:02:30.919 between ownership and the returns flown through owners versus our 0:02:30.960 --> 0:02:33.240 wage earners. So I think people are looking at that. 0:02:33.840 --> 0:02:36.399 And I think a really big factor is property. Where 0:02:36.400 --> 0:02:39.200 you've seen older generations been able to do very well 0:02:39.240 --> 0:02:43.320 through owning property, and I think younger generations are rightly 0:02:43.360 --> 0:02:46.000 seeing that probably those opportunities are not there for them. 0:02:46.440 --> 0:02:48.720 So what are other ways that they can participate in 0:02:48.760 --> 0:02:52.520 the capital markets in the growth of the economy. And 0:02:52.560 --> 0:02:54.120 I think that you know, this is clearly one of 0:02:54.120 --> 0:02:55.080 those leavers. 0:02:54.960 --> 0:02:58.880 And Andrew, You've spent years helping to build Parts Trader, 0:02:59.080 --> 0:03:03.480 and that sort of needed in this recent acquisition. Because 0:03:04.360 --> 0:03:07.359 Part Straighter had this employee share scheme, your team has 0:03:07.400 --> 0:03:10.560 gotten to have a share in that success. Why did 0:03:10.560 --> 0:03:14.040 part straight to choose to offer employees shares instead of 0:03:14.080 --> 0:03:16.600 maybe just like a higher salary more bonuses. 0:03:17.400 --> 0:03:19.760 Originated from one of the founders who had actually been 0:03:19.840 --> 0:03:22.760 quite successful with trade me and he's seen there the 0:03:22.800 --> 0:03:28.160 benefit of employees participating in the upside of growing value 0:03:28.960 --> 0:03:33.080 and also the philosophy that the employee is going to 0:03:33.080 --> 0:03:35.720 do a big part of growing the value. So when 0:03:35.760 --> 0:03:39.200 you're in an early stage company, you really have some 0:03:39.240 --> 0:03:44.520 good ideas, a thesis, really, but there's nothing there other 0:03:44.560 --> 0:03:46.680 than belief for people to show up every day, and 0:03:46.720 --> 0:03:48.440 so you really want to reward them and you want 0:03:48.480 --> 0:03:51.680 them to feel part of it and to act somewhat 0:03:51.920 --> 0:03:56.480 like owners because the original founders, the investors, the managers, 0:03:56.480 --> 0:03:59.080 they can't be everywhere. You know, we want people to 0:03:59.640 --> 0:04:02.800 grow with the business and to think like owners, to 0:04:02.800 --> 0:04:07.560 look after the customers, to make wise decisions. And you know, ultimately, 0:04:07.800 --> 0:04:10.320 in an early stage business you work more than forty 0:04:10.320 --> 0:04:12.920 hours a week at times, and times it's pretty tough 0:04:13.880 --> 0:04:16.960 and you have to keep going. The ownership philosophy and 0:04:17.000 --> 0:04:20.320 the incentive behind that is really valuable. So it's one 0:04:20.360 --> 0:04:23.840 part of it. The other part of it is, you know, 0:04:23.960 --> 0:04:26.960 the reward and at early times in a business, maybe 0:04:27.240 --> 0:04:30.320 you're not at the upper end of market salary. Sometimes 0:04:30.320 --> 0:04:33.640 you can't afford it. So how do you recognize and 0:04:33.720 --> 0:04:36.520 reward those people? And they are often attracted to ownership 0:04:36.520 --> 0:04:39.440 and doing something slightly different. There's a reason they've chosen 0:04:39.480 --> 0:04:41.800 to not be in a corporate and therefore there's some 0:04:41.839 --> 0:04:45.080 different drivers as to how they might be motivated and 0:04:45.120 --> 0:04:47.600 that kind of thing. But so you're sharing the upside, 0:04:47.760 --> 0:04:49.400 and I think that's a really important part of it. 0:04:49.440 --> 0:04:53.120 And that's where good owners and good founders, you know, 0:04:53.240 --> 0:04:55.960 really understand it that they're sharing the upside and so 0:04:56.040 --> 0:04:58.559 why not make the upside as much as you can. 0:04:59.080 --> 0:05:01.479 That's quite a philosophical kind of approach. 0:05:02.880 --> 0:05:05.240 Well, yes it is, but it also plays out economically 0:05:05.279 --> 0:05:06.119 if you can get it right. 0:05:06.200 --> 0:05:09.320 And to Andrew's point, that's that's why we get really 0:05:09.360 --> 0:05:12.839 excited about this as a mechanism for broad based ownership, 0:05:12.920 --> 0:05:15.159 because when it is done right, it can create that 0:05:15.320 --> 0:05:19.279 genuine win when you know, employers can benefit from greater retention, 0:05:19.520 --> 0:05:23.640 greater incentivization and really driving that employee owner mindset. And 0:05:23.680 --> 0:05:26.560 for employees, we can we see in the data that 0:05:26.600 --> 0:05:30.360 they can genuine, genuinely generate long term wealth through these 0:05:30.360 --> 0:05:34.200 schemes if there is good upside, so you know, done right, 0:05:34.360 --> 0:05:36.040 they can they can be a great win win. 0:05:36.279 --> 0:05:39.320 On that note of impact, Andrew, how have you seen 0:05:39.640 --> 0:05:43.080 the real impact of ownership from within the business, whether 0:05:43.080 --> 0:05:47.360 that's with employee retention or maybe improving culture with everybody 0:05:47.360 --> 0:05:50.160 having kind of a shared goal to work towards. 0:05:50.320 --> 0:05:53.640 We've got a New Zealander and US components to our business. 0:05:53.680 --> 0:05:55.520 So we had to have a plan that worked across 0:05:55.560 --> 0:05:59.120 both jurisdictions, and we looked at she is issuing shares 0:05:59.360 --> 0:06:01.400 or of sheer ops or things like that in natural 0:06:01.440 --> 0:06:03.800 in securities and both jurisdictions. Was hard. So we took 0:06:03.800 --> 0:06:08.680 a cash based, effectively phantom plan that operated on an 0:06:08.760 --> 0:06:13.039 annual grant to all staff the qualified and then that 0:06:13.200 --> 0:06:15.919 vested over three years, So if you left within the 0:06:15.960 --> 0:06:19.960 three years, you got no return because creating value takes 0:06:19.960 --> 0:06:22.520 a period of time, and so that was our belief 0:06:22.520 --> 0:06:25.440 that it was reasonable, and so we took that and 0:06:25.560 --> 0:06:27.920 at the end of the three years we cashed that 0:06:28.040 --> 0:06:31.640 period out. We set a target for sheer appreciation private 0:06:31.680 --> 0:06:34.440 equity sort of levels at twenty five percent compounding paranum, 0:06:34.480 --> 0:06:37.440 so a reasonable clip. Then if we achieved all of that, 0:06:37.560 --> 0:06:40.040 we got one hundred percent. Staff got one hundred percent 0:06:40.480 --> 0:06:43.159 of what the target was. You kind of doubled them 0:06:43.200 --> 0:06:46.440 three years. If you're compounding at twenty five percent paranum, 0:06:46.440 --> 0:06:50.560 which is pretty good. During time, we paid out cash 0:06:50.640 --> 0:06:53.880 along the way and that was that was a good 0:06:53.960 --> 0:06:56.640 reward because it ended up being a longer journey than 0:06:56.640 --> 0:06:59.720 we thought. But it also helped those people who had 0:06:59.720 --> 0:07:02.040 been for a while, some of the key people that 0:07:02.080 --> 0:07:05.320 we really needed to stay on. They ended up getting 0:07:05.320 --> 0:07:09.000 an annual bonus as a result of vesting. But these 0:07:09.040 --> 0:07:10.680 are the people who have been there for quite a 0:07:10.760 --> 0:07:13.200 long time now, so three years and four years and 0:07:13.280 --> 0:07:16.040 five years, you know, so it becomes that annual incentive. 0:07:16.080 --> 0:07:18.520 So it was very effective in that way. And it 0:07:18.640 --> 0:07:21.760 was also so we'd have the results to the valuation 0:07:21.800 --> 0:07:24.080 would be at the end of the calendar year and 0:07:24.160 --> 0:07:26.640 payment around March, and people would really look forward to 0:07:26.720 --> 0:07:29.000 that and it was a it was a moment and 0:07:29.280 --> 0:07:31.240 it became sort of the part straight or calendar, you know, 0:07:31.320 --> 0:07:33.760 like what's the payment going to be? How do we go? 0:07:34.320 --> 0:07:39.120 And so we got everybody aligned in the success in 0:07:39.160 --> 0:07:43.240 a place to an obligation on management to communicate really 0:07:43.240 --> 0:07:47.400 well to all staff. So culturally it was very effective 0:07:47.520 --> 0:07:51.440 about just doing all those right things reinforcing the behavior. 0:07:52.160 --> 0:07:54.680 If we as managers were behind on communication, we were 0:07:54.720 --> 0:07:57.280 asked and so we just fount up as a result. 0:07:57.560 --> 0:08:00.560 Terrific retention, you know, we've got some of the tech, 0:08:00.800 --> 0:08:03.480 and then at the end there's been an, i guess 0:08:03.720 --> 0:08:05.800 what's called a cliff festing of all the three tranches 0:08:05.800 --> 0:08:09.840 that were running. So on the actual payment settlement, which 0:08:09.880 --> 0:08:12.680 was first of April this year, that was all paid 0:08:12.720 --> 0:08:16.800 out in one go, so it was a nice, nice, 0:08:17.520 --> 0:08:19.360 decent bonus for people. 0:08:19.560 --> 0:08:21.200 It sounds like that's kind of the best of both 0:08:21.240 --> 0:08:24.160 worlds there where it almost is working like a bonus structure, 0:08:24.200 --> 0:08:27.280 but then there's also that sort of delayed gratification element 0:08:27.360 --> 0:08:30.360 of it as well. How did that feel to have 0:08:30.440 --> 0:08:33.240 the acquisition come through and know that that success was 0:08:33.280 --> 0:08:35.960 going to be shared in a very real way with 0:08:36.080 --> 0:08:36.800 the team. 0:08:37.320 --> 0:08:40.720 It's great because otherwise it's uncomfortable because some people have 0:08:40.760 --> 0:08:45.160 benefited and some people haven't, and not everybody's got the 0:08:45.200 --> 0:08:48.160 ability to put money away. So one of the discussions 0:08:48.160 --> 0:08:50.400 around this is how do you structure it? Should they 0:08:50.440 --> 0:08:53.040 contribute themselves as challenging because then you've got the ones 0:08:53.080 --> 0:08:57.760 whose personal situations permit them to contribute and others who 0:08:58.000 --> 0:09:00.559 are already maxed out and can't, or boarding others in 0:09:00.600 --> 0:09:02.760 their family or things like that. So if you can 0:09:02.840 --> 0:09:05.720 get something that is broad based at least for some 0:09:05.880 --> 0:09:09.280 level of participation, and you see at other levels, you know, 0:09:09.320 --> 0:09:13.640 executives do get often share options or other remuneration. That's 0:09:13.760 --> 0:09:15.679 that's kind of different to the broad based stuff we're 0:09:15.679 --> 0:09:18.040 trying to talk about here. So when you had the 0:09:18.040 --> 0:09:22.640 wide participation with everybody getting something and it's all related 0:09:22.679 --> 0:09:26.400 to the returns, it's compelling, it's resatisfying. 0:09:27.240 --> 0:09:31.040 Employee share schemes are maybe stereotypically kind of associated with 0:09:31.120 --> 0:09:35.280 these like high tech growth companies. SpaceX is the big 0:09:35.320 --> 0:09:39.040 example that maybe springs to mind, but these do also 0:09:39.080 --> 0:09:41.719 show up in other kind of business models, other industries. 0:09:42.760 --> 0:09:45.120 Yeah, totally. I think that it's actually quite a big 0:09:45.200 --> 0:09:48.280 myth is that, you know, option schemes or share schemes 0:09:48.360 --> 0:09:51.240 are just for tech, and that's absolutely not true. You know, 0:09:51.280 --> 0:09:53.640 we were with a range of companies, sort of larger 0:09:53.679 --> 0:09:59.200 corporates in different industries, whether that's energy or telecommunications or 0:09:59.240 --> 0:10:01.959 other industries over long periods of time, and often these 0:10:02.000 --> 0:10:04.960 industries have very long tenure. They can be a really 0:10:05.040 --> 0:10:09.560 meaningful part of someone's you know, misting for retirement. In 0:10:09.600 --> 0:10:12.400 New Zealand, we have a tax exempt framework that can 0:10:12.440 --> 0:10:15.920 work really well for broad based schemes and have some 0:10:16.000 --> 0:10:18.760 of the components that Andrew's been talking about, like three 0:10:18.840 --> 0:10:22.800 year vesting, and you know, we see employees that might 0:10:22.840 --> 0:10:25.760 have worked for twenty years, they've got one thousand dollars 0:10:26.120 --> 0:10:29.520 each year in these in these shares, and after twenty 0:10:29.600 --> 0:10:32.640 years with dividends reinvested, it's over one hundred thousand dollars. 0:10:32.720 --> 0:10:35.080 Are there any other misconceptions that we tend to see 0:10:35.120 --> 0:10:37.160 crop up around employe ownership? 0:10:37.760 --> 0:10:40.520 I mean, I think sometimes it feels quite binary sort 0:10:40.559 --> 0:10:42.320 of you know, you're either giving shares or you're not. 0:10:42.400 --> 0:10:44.720 And I think that the scheme that Andrew talked about, 0:10:44.760 --> 0:10:47.520 a fantom scheme, is a great example where there are 0:10:47.520 --> 0:10:50.800 actually lots of different options available. You know, phantom schemes 0:10:50.840 --> 0:10:54.000 where you are tracking the share price so employees get 0:10:54.000 --> 0:10:57.120 the economic benefit of being an owner, but it's settled 0:10:57.120 --> 0:10:59.520 in cash rather than shares at the end. There can 0:10:59.559 --> 0:11:02.320 be a great example. I also think, you know, there 0:11:02.360 --> 0:11:07.160 is so much flexibility around contributions, whether that's employer contributed, 0:11:07.240 --> 0:11:09.680 it can be a hybrid of both. We think that 0:11:09.760 --> 0:11:12.640 they work really well where there is some element of 0:11:12.720 --> 0:11:16.839 employer contribution that is broad even if employees get the 0:11:16.880 --> 0:11:20.680 option of contributing over and above having some base element 0:11:20.720 --> 0:11:22.960 where everyone is getting a piece of that pie, a 0:11:22.960 --> 0:11:28.120 piece of that upside is very very powerful. Another point 0:11:28.160 --> 0:11:30.920 I would add in the data is that there is 0:11:30.960 --> 0:11:33.200 a lot of appetite for shares. I mean, that's what 0:11:33.280 --> 0:11:35.880 we found doing the research, is that eighty percent of 0:11:36.000 --> 0:11:38.160 employees will be willing to get some of their salary 0:11:38.240 --> 0:11:42.960 as shares, so overwhelming, you know, majority. But there is 0:11:43.040 --> 0:11:46.080 a big education gap where about two thirds of employees 0:11:46.120 --> 0:11:49.520 surveyed are not familiar with employee share schemes. So they 0:11:49.559 --> 0:11:52.839 want equity, but they're not familiar with some of their structures. 0:11:52.920 --> 0:11:56.040 So I think that's where a lot of the opportunity is. 0:11:56.120 --> 0:11:59.080 That's there is an education gap to bridge. 0:11:58.679 --> 0:12:01.360 And for employees who might not be super familiar with 0:12:01.440 --> 0:12:05.680 these concepts, how does ownership tend to pay off, Like, 0:12:05.760 --> 0:12:09.160 whether that's through acquisitions or through going public, how do 0:12:09.240 --> 0:12:13.360 they actually end up getting financially rewarded for structures like these? 0:12:13.840 --> 0:12:16.400 Yeah, so if you work at a company that is 0:12:16.440 --> 0:12:19.280 already listed, then that's obviously quite a big advantage because 0:12:19.280 --> 0:12:22.560 there's already liquidity in those shares. So once they vest 0:12:22.600 --> 0:12:24.600 in the yours. Then you can sell them any time, 0:12:24.720 --> 0:12:27.559 or you can hold on to them and reinvest those 0:12:27.559 --> 0:12:31.440 dividends over periods of time. For a private company, and 0:12:31.840 --> 0:12:34.800 the majority of companies in New Zealand are private, it 0:12:34.840 --> 0:12:38.280 looks a little bit different. Sometimes it is a big 0:12:38.320 --> 0:12:41.719 transaction like an acquisition that creates that liquidity event for 0:12:41.880 --> 0:12:44.600 employees to get to get paid or get the cash. 0:12:44.720 --> 0:12:47.880 Other times, for companies that have been private for a 0:12:47.920 --> 0:12:51.719 long time, they've created their own liquidity mechanisms, so they might, 0:12:51.760 --> 0:12:55.040 for example, particularly if they're profitable, be buying back shares 0:12:55.400 --> 0:12:58.160 every year so that employees can sell some shares and 0:12:58.200 --> 0:13:01.640 get that liquidity. And actually a really great global example 0:13:01.640 --> 0:13:05.640 of that Stripe, the payment technology company, where you're sort 0:13:05.640 --> 0:13:08.080 of assumed that Stripe would be listed by now, we 0:13:08.160 --> 0:13:10.439 have seen a real move for companies to stay private 0:13:10.520 --> 0:13:14.640 for much longer, and Stripe have quarterly windows, so every 0:13:14.679 --> 0:13:17.400 three months they're running an event for employees to sell 0:13:17.440 --> 0:13:20.560 their shares back to Stripe and get cash if they 0:13:20.600 --> 0:13:21.640 want so. 0:13:21.880 --> 0:13:26.840 Ownership, however, is no guarantee of having like a windfall, 0:13:27.520 --> 0:13:29.960 and in fact it can go the other way as well. 0:13:30.120 --> 0:13:33.560 There's maybe certain kind of scheme structures that might be 0:13:33.640 --> 0:13:37.160 more prone to exposure than others. And I think you 0:13:37.240 --> 0:13:38.800 might have a few war stories. 0:13:39.120 --> 0:13:43.840 Yes, well, I do some from personal experience investing my 0:13:43.880 --> 0:13:46.120 own money in companies that I've been part of starting. 0:13:46.440 --> 0:13:49.640 You could call that a shareplan of sorts, but more generally, 0:13:49.720 --> 0:13:52.680 when you're getting out into the wider things, when the 0:13:52.679 --> 0:13:56.160 share price goes down and you've got employees who are 0:13:56.280 --> 0:13:59.400 out of the money, it really depends if you ask 0:13:59.440 --> 0:14:01.400 them to borrow money to buy the shares, then they 0:14:01.480 --> 0:14:03.600 have a debt, and then they've got an asset with 0:14:03.800 --> 0:14:05.720 less than the debt. That's not a good place to be. 0:14:05.840 --> 0:14:09.240 So think about structuring. And certainly when you go out 0:14:09.240 --> 0:14:14.120 to all staff, they won't all understand the plan as 0:14:14.200 --> 0:14:15.760 much as you try and educate them and things like 0:14:15.800 --> 0:14:19.040 that to the pitfalls and things. And as an employer 0:14:19.040 --> 0:14:20.840 you are selling the upside. You've got to talk about 0:14:20.840 --> 0:14:24.120 the risks and be quite transparent. But it is a 0:14:24.200 --> 0:14:28.160 challenge to get those things right. So think about the 0:14:28.200 --> 0:14:33.720 portion of remuneration, think about whether it's employer contributed the 0:14:33.760 --> 0:14:35.600 bit that's at risk, and over and above, they still 0:14:35.640 --> 0:14:36.840 need to be able to pay the rent and pay 0:14:36.880 --> 0:14:39.560 the groceries and things like that over and above it. 0:14:39.640 --> 0:14:44.040 Yeah, I completely agree. I think, particularly for broad based schemes, 0:14:44.160 --> 0:14:46.640 I think there should be that sort of base portion. 0:14:47.400 --> 0:14:50.080 I really think it is better if that's employee funded, 0:14:50.520 --> 0:14:55.000 because you know, all investing comes with risk, and you know, 0:14:55.040 --> 0:14:57.800 if anything, the world's got more volatile, and you know, 0:14:57.840 --> 0:14:59.920 who knows what can happen, and it can be total 0:15:00.280 --> 0:15:04.320 external forces that can mean that share prices reduced materially, 0:15:04.400 --> 0:15:07.640 that has nothing to do with the employees contribution. I 0:15:07.680 --> 0:15:09.760 was familiar with one case where it was in the 0:15:09.760 --> 0:15:13.400 healthcare industry. You know, healthcare workers are in high demand. 0:15:14.000 --> 0:15:16.280 It's really really important to be able to retain them. 0:15:17.000 --> 0:15:20.040 They had a scheme for reasons sort of outside of 0:15:20.080 --> 0:15:24.560 the company's control. The share price dropped materially, and so 0:15:24.960 --> 0:15:28.360 because employees were asked to buy in through and through 0:15:28.400 --> 0:15:31.360 a loan with the company, suddenly you know, their shares 0:15:31.400 --> 0:15:34.400 were worth far, far less than the loan they had, 0:15:34.880 --> 0:15:37.720 And that goes from what could be quite a good 0:15:37.720 --> 0:15:43.760 incentivization tool to incredibly disincentivizing. So, you know, I think 0:15:43.760 --> 0:15:46.240 that for a broad based scheme, it tends to work 0:15:46.280 --> 0:15:48.480 better when it is open above that base pay and 0:15:48.520 --> 0:15:49.960 it is employee funded. 0:15:50.320 --> 0:15:53.440 Let's say we're in the shoes of an employee who's 0:15:53.680 --> 0:15:57.160 maybe got the option on the table of taking either 0:15:57.440 --> 0:16:00.560 a higher salary or taking a portion of that remmuneration 0:16:00.840 --> 0:16:03.840 as equity. What are the trade offs that they would 0:16:03.920 --> 0:16:05.920 need to consider in making that decision. 0:16:06.960 --> 0:16:09.680 I'd say, first of all, make sure you really understand 0:16:09.680 --> 0:16:13.120 the detail. So you know, there are often tax implications, 0:16:13.640 --> 0:16:16.520 so make sure you understand those. Making sure that you understand, 0:16:16.880 --> 0:16:18.720 you know, what the what the goal is of the 0:16:18.760 --> 0:16:22.120 company if it's private, is there a target window in 0:16:22.240 --> 0:16:25.160 terms of getting acquired or some sort of other events. 0:16:25.240 --> 0:16:27.480 So really try and understand, you know, what the terms 0:16:27.480 --> 0:16:31.200 are of the offer, what that actually means, and the 0:16:31.440 --> 0:16:34.040 you know, your employers should be communicating that well because 0:16:34.080 --> 0:16:37.440 that is really important for employees to understand. But yeah, 0:16:37.480 --> 0:16:39.640 I'd be thinking about is this company company that I 0:16:39.680 --> 0:16:41.600 really believe in? Is this a company that I think 0:16:41.680 --> 0:16:43.560 is going to do really well? And I think really 0:16:43.600 --> 0:16:45.880 think about you know, if it's not. If I'm not 0:16:45.920 --> 0:16:48.280 taking that and I'm taking your higher salary, then how 0:16:48.440 --> 0:16:52.280 us I make getting ownership because wealth development does come 0:16:52.280 --> 0:16:55.960 from that. You know, a wage is fixed it's you know, 0:16:56.320 --> 0:16:59.360 it doesn't have that upside that ownership and you know 0:16:59.480 --> 0:17:02.440 shares or you know, in the past property. I think 0:17:02.480 --> 0:17:05.119 that for when people thinking about their long term wealth, 0:17:05.480 --> 0:17:07.600 it is really important to make sure that you are 0:17:07.640 --> 0:17:10.000 participating in that upside. Somehow. 0:17:10.640 --> 0:17:13.399 You sort of touched on tax there, and I know 0:17:13.440 --> 0:17:17.919 that tax can be quite complex complex in this domain. 0:17:18.560 --> 0:17:21.200 What are some of the other risks that you kind 0:17:21.200 --> 0:17:24.280 of want to understand before you say yes to getting 0:17:24.320 --> 0:17:27.400 issued employees shares? I mean, concentration risk is one. 0:17:27.720 --> 0:17:29.800 You know, if you're working for that employer and you're 0:17:29.800 --> 0:17:33.080 getting shares as part of your muneration too, you're pretty 0:17:33.400 --> 0:17:37.640 tied in and pretty concentrated to that opportunity. I don't 0:17:37.640 --> 0:17:40.480 think that's necessarily necessarily a reason not to do it, 0:17:40.800 --> 0:17:43.040 but it is just going in eyes wide open. That 0:17:43.080 --> 0:17:45.000 would be one that I'll be thinking about. And I 0:17:45.040 --> 0:17:48.879 also think that liquidity risk as well, like really thinking 0:17:48.920 --> 0:17:52.080 about you know, when the timing of that what needs 0:17:52.119 --> 0:17:54.200 to happen in order for me to actually get paid 0:17:54.640 --> 0:17:57.479 cash and for this paper value to turn into cash, 0:17:57.520 --> 0:18:00.520 which ultimately at some point in time needs to do 0:18:00.600 --> 0:18:02.919 for that to be the reward that you want. It 0:18:02.920 --> 0:18:03.520 to be, and. 0:18:03.400 --> 0:18:06.439 Markets go up and markets go down, and fortunes go 0:18:06.600 --> 0:18:09.200 up and go down, and so it's not it's not 0:18:09.240 --> 0:18:12.400 a straight line. So I think you've got to think 0:18:12.400 --> 0:18:16.840 about your personal situation. And Susanna says, maybe put some. 0:18:17.000 --> 0:18:20.520 It depends on your risk appetite. So I did broke, 0:18:20.840 --> 0:18:24.359 didn't break the rules. I chose to concentrate. And it's 0:18:24.480 --> 0:18:26.879 you know, it works out sometimes and other times it 0:18:26.880 --> 0:18:30.520 hasn't for me. So do what you will. But you 0:18:30.560 --> 0:18:33.399 could take a portion and put it into a fund 0:18:34.080 --> 0:18:38.000 that you know, maybe shares as well as your employer 0:18:38.080 --> 0:18:41.480 if you've got the choice. And it does change things. 0:18:41.560 --> 0:18:45.160 And these things are done for capitalist reasons. The holders 0:18:45.280 --> 0:18:48.920 are expecting a return on this investment and the employees 0:18:49.400 --> 0:18:51.800 over and above things, and it does, you know, it 0:18:51.880 --> 0:18:54.120 becomes a hearts and mind's game. So the mind being 0:18:54.359 --> 0:18:55.879 the logic. I'm going to go to work, I'm going 0:18:55.880 --> 0:18:59.159 to do my job. But the hardest I'm an owner 0:18:59.200 --> 0:19:02.200 of this business. I actually I care over and above 0:19:02.280 --> 0:19:05.800 my nine to five and my colleagues are invested in this, 0:19:05.960 --> 0:19:09.880 in this together, and that is powerful, and that's where 0:19:10.080 --> 0:19:12.200 you know you can create value. You can get through 0:19:12.240 --> 0:19:16.359 things you can innovate and do more creative stuff, not 0:19:16.440 --> 0:19:18.600 so you can't do it otherwise, but it just sort 0:19:18.600 --> 0:19:21.520 of triggers and supports all of that, triggers the why 0:19:21.960 --> 0:19:24.560 behind doing all of those sort of extra things, which 0:19:24.560 --> 0:19:25.160 is pretty cool. 0:19:25.800 --> 0:19:28.080 I think that's such an important point, and I think 0:19:28.119 --> 0:19:30.560 it does. I think it does change you when you 0:19:30.640 --> 0:19:33.840 become an owner and really changes the mindset that you have. 0:19:34.080 --> 0:19:37.240 And what's really interesting is at Shares is when we've 0:19:37.840 --> 0:19:42.120 sometimes done customer interviews, their employee equity scheme is often 0:19:42.160 --> 0:19:45.480 their first foray into ownership outside of the KIPI saver, 0:19:46.400 --> 0:19:48.359 and so it can be really the start of a 0:19:48.480 --> 0:19:51.200 journey of wanting to become an owner and thinking about 0:19:51.280 --> 0:19:53.320 capital markets and a whole different way than they had 0:19:53.320 --> 0:19:54.240 contemplated before. 0:19:54.760 --> 0:19:56.280 It's like a gateway drug. 0:19:57.400 --> 0:19:58.160 Done the best way. 0:20:00.160 --> 0:20:03.520 So you're both real champions of this kind of ownership 0:20:03.640 --> 0:20:07.240 culture for you both looking ahead, what would kind of 0:20:07.320 --> 0:20:11.080 the ideal pay packet look like, say, ten years down 0:20:11.119 --> 0:20:13.920 the line, is that still mostly salary? Is it looking 0:20:14.040 --> 0:20:16.280 like a higher portion of shares? 0:20:17.040 --> 0:20:21.359 Certainly, for me, ownership's key and has been part of 0:20:21.400 --> 0:20:23.040 what I do for the last thirty years. So I 0:20:23.400 --> 0:20:25.400 wouldn't take a job without it, And to the extent 0:20:25.440 --> 0:20:27.160 I started an own company because I thought I should 0:20:27.160 --> 0:20:28.959 have been paid more out of an exit that I've 0:20:28.960 --> 0:20:30.640 done a lot of good work on and that didn't 0:20:30.640 --> 0:20:32.440 go so well, So I got the lesson there as well. 0:20:32.560 --> 0:20:34.960 I think in ten years, what I would want as 0:20:35.200 --> 0:20:38.280 this really to be the expectation for employees that their 0:20:38.440 --> 0:20:42.720 remuneration does include ownership, and that that expectation is on 0:20:42.840 --> 0:20:45.159 employers as well, is that actually, if I want to 0:20:45.840 --> 0:20:48.800 a trait and retain the best talent, then employee equity 0:20:48.840 --> 0:20:52.280 has got to be part of that mix. Also, I 0:20:52.280 --> 0:20:55.280 think that over the last decade, we've seen this, you know, 0:20:55.400 --> 0:20:59.440