Directors and Key Shareholders have a responsibility to ensure that the success of a company benefits all Stakeholders – Large and Small.
While options for key staff have been a long-held pillar of most success companies, should not the success of a company benefit all Stakeholders who contribute, not just those who negotiate options into their contracts, after all, many frontline staff simply may not have the mechanism within their employment contracts to do so.
As we approached the sale of Cult Beauty in 2021, we had formed a series of board committees, including a remuneration committee, and with the assistance of EY Consulting it became apparent to committee members, that through the years of triple digit growth, that while annual bonuses had been paid company wide, some inadvertent inequity had been created within staff ranks. This also raised the question – shouldn’t all staff who had contributed to the success of the company over a number of years (from warehouse to C-Suite) have that value recognised, whether they were option holders or not.
We tasked an Exit committee member to work with the CEO to review all staff remuneration, with a view not to an annual bonus, but an exit bonus (or sale bonus if you will), and report back to the committee. We use the term sale bonus, as typically a ‘retention’ bonus would be paid by the buyer purchasing the company, but in this case the Remuneration Committee under Mark Quinn-Newall’s leadership ultimately recommended to the board, setting aside £5.5m, which was unanimously approved in the days leading up to the sale of the company.
Our consultants, rightly, doing their job, advised us that we were under no obligation to pay such a bonus and that it was without precedent, but ultimately could find no fault with the position that all Stakeholders whether large or small should and could in this case benefit from the sale.
The process of calculating those bonuses is not without critics and an imperfect process, but staff received between 30-200% of the annual salaries as bonuses through a process that was weighted in favour of those without options or existing shareholding. These bonuses were paid company wide to over 230 staff.
It is interesting to note, the sale of the company created Twenty-Nine (29) new millionaires, returned x157 investment, in addition to the £5.5m sale bonus paid to staff.
