ANNUAL EQUITY SUMMIT 2022 RECAP
Making Employees Owners: Expanding Equity to Broader Investors and Operators
With Laura Martinez, Melia Russell, and Zach Pelka
With Laura Martinez, Melia Russell, and Zach Pelka
Implementing employee ownership programs can help a company attract and retain talent and beat out much larger competitors, according to Une Femme Wines co-founder and COO Zach Pelka. Laura Martinez, head of people at tile manufacturing company Fireclay Tile, has seen how adding an employee-stock plan can help a company grow.
Both also understand that using these programs requires company leadership or HR to build an educational curriculum to help workers understand the potential value of their stock or options.
Martinez and Pelka both sat down with Business Insider reporter Melia Russell during the Carta Equity Summit to discuss their respective company’s experience with employee-stock ownership programs, including the challenges and benefits of sharing the company’s success with their workforce.
Pelka worked at a pair of tech companies before joining his sister Jen Pelka in 2020 to launch Une Femme Wines, a sparkling wine brand that markets to women. Pelka saw firsthand how the employee-stock ownership programs could align incentives between employees and founders and create a company culture where workers are happy and engaged. And he knew it was a way to share in the wealth if the company eventually goes public or gets acquired.
The equity plan has also served as “a nice kicker” for Une Femme’s recruiting efforts. In the past year, Une Femme has grown from two employees to 17. In June, the company raised a $14 million Series A round from KarpReilly, a Connecticut-based private equity firm that specializes in early-stage growth deals.
By offering a generous employee equity compensation package, Pelka said Une Femme has been able to compete for talent with big beverage conglomerates such as Constellation and Budweiser.
“I think that without the employee stock option pool, we wouldn’t be able to afford half of our employees just because we’re competing with a lot of the traditional brands,” Pelka said.
Une Femme Wines instituted the employee option pool during the Series A fundraise. In fact, the company’s investors required it. As a result, Pelka said his job has become less difficult.
“Everyone shares in that upside, which from a decision making framework makes my job so much easier and makes the overall company performance so much better,” he said. “And at the end of the day, it’s doing the right thing, right?
Martinez admits that Fireclay has faced challenges implementing their employee stock ownership program. For one, many of their workers are non-English speakers who don’t often work with computers.
“A complication that we’ve got is education,” she said. “Our demographic, we have a high number of non-English speakers and, um, lack of computer proficiency. It’s not their job. Like they don’t need to use the computer, so I get it. That can be very difficult.”
Their plan also received some push back from investors. In 2020, Fireclay Tile wanted to increase their employee option pool from 14% to 30%. In other words, employees would own 30% of the company’s equity. Most employee stock or option pools are usually between 10% and 15%.
Fireclay Tile worked with the board and investors to reach a compromise– the company switched from a time-based vesting schedule to a performance-based vesting schedule. And the deal worked out because fully-vested employees had the option to sell their shares to investors during the transition, Martinez said.
Fireclay has not looked back. In October, the company acquired Spokane, Wa.-based Quarry Tile, as part of a $26 million investment to expand its production capabilities.
Unsurprisingly, Martinez said it’s been especially important to have an employee-stock ownership plan that will scale with your business.
At the end of the day, equity is the most impactful way of building meaningful wealth. Whether it’s from an ownership perspective at the founder level or for employees, it has the most upside possible.
Why was it important for you to offer employee ownership at your companies?
“We thought about it from two lenses,” Pelka said. “One, (it is) a pure tactical strategy within running and operating a business. The second, more important one is the human element in thinking how you do the right thing and treat your employees the right way and establish a positive culture for the company.”
“We wanted to be competitive, we wanted to incentivize, and we wanted to fuel that,” Martinez says. “We’ve been able to create ownership for all. If we were going to share the pie with external investors, the right thing to do is to make sure our employees are going to win as well.”
