Private Ryan

Some things are not meant to be shared. This was illustrated in the 1998 epic Saving Private Ryan. Private Ryan (played by Matt Damon) asked Captain Miller (played by Tom Hanks) to give him more detail about his wife. To which Captain Miller responds, “No, no that one I save just for me.”

I was reminded of that while recently visiting an employee owned company. They were preparing for an all employee meeting and asked us how much information do other ESOPs share with their employee owners – such a simple question with a complicated answer.

The short answer is – it depends. In many regards this question has more to do with company culture than ownership structure. Companies that practice open book management tend to share more than those that don’t. Companies that are majority or completely employee owned share more than those with minority ESOP ownership.

If you are contemplating how much information to share you might want to consider the following questions.

  • What are the employees going to do with the information? Is it going to increase sales, improve productivity, or generate greater engagement? If not, what is the benefit to sharing it with them?
  • Will sharing the information do more harm than good? If the company shares that it has a large cash balance it might cause unrest with employees who would like a bigger raise. Sharing salaries at any level is rarely done for this very reason.
  • Are the employees trained to understand the financial information? If not, what do you have to do to get them educated? Income statements, balance sheets, and statements of cash flow are readily understood by management but can be completely foreign to the rest of the company.
  • Are you able to create line of sight between their daily activities and the firm’s financial performance? Is the information relevant to their job?
  • What would happen if your competitors/suppliers/clients/media saw the information? Would they demand price concessions or use it to your disadvantage? You should assume that anything shared with your employees will eventually be shared more broadly.

There is no one right answer for all companies. Each company is unique and therefore so is their approach to sharing information.

In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter –  @jlripperger.

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The subject matter in this communication is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.
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