Being Fair and Equitable
Being fair and equitable is much more than a philosophical or ethical principal - it is also essential to maximizing shareholder value.
|“Our goal is to be fair, and be seen to be fair, both today and for years into the future.”|
|Spoken by Basil Peters sometime in the mid-1980’s and repeated a thousand times since.|
The first part is easy.
Be Fair - if you were to ask a hundred experienced, angel investors, knowledgeable mentors or directors there would be a reasonably tight consensus on what would be fair and equitable in a given corporate situation.
Be Seen to Be Fair - is more challenging because often the people expressing their opinion on fairness are young entrepreneurs, or inexperienced investors, who don’t have enough experience to really know what is fair. This step often requires a considerable amount of time, energy and persuasion to have everyone 'see' that an agreement is fair and equitable.
Today - is also relatively easy. At the beginning of most companies there is boundless optimism and enormous team spirit. This makes it much easier to build consensus on what is fair.
Years into the Future – is absolutely the most challenging. As years pass, the reality of everyone’s contributions becomes clear to all. A team member who everyone expected would find a cure for cancer might have discovered a new interest in a completely different area. One of the founders who swore they would contribute as many hours as everyone else may have elected to train for the ultra marathon (taking up forty hours a week of their 'spare time'.)
Building fair and equitable structures, equity ownership and comp plans is an essential component of a successful company and an angel investor portfolio. If people do not believe that they, or fellow stakeholders, are being treated fairly, the impact on morale and performance can easily be detrimental enough to be fatal to a nascent enterprise.
Being fair and equitable is part of the corporate DNA - it just has to be right.