Introduction
Ethical issues are a common challenge related to entrepreneurial practice. They are especially significant during the initial stages of business development or when activities are connected to financial matters. This paper will address one of these problems – dividing ownership shares. The focus will be made on the role of founders and other employees and their right to an equal division of shares.
The dilemma will be viewed from the perspective of both organizational and industry norms. In order to address this problem, it is recommended to follow a generally accepted model of organizational behavior – create a pyramid of ownership and divide shares based on an individual’s contribution to business growth and risks and responsibilities they face.
Main body
Ethical issues are impossible to avoid when carrying out entrepreneurial activities, as they are related to working with people. They are extremely severe if a company does not have a code of conduct or a generally accepted framework of behavior. It is a common problem for startups and young organizations. In this paper, the focus will be made on the ethical dilemma caused by dividing ownership shares.
The challenge is driven by the fact that all employees want equal shares regardless of their experience and background. Here, the problem is the following: people who started working recently want benefits equal to those of founders. So, it is essential to determine whether this desire is ethical and should be protected.
The challenge is connected to some values and beliefs such as commitment, respect for teamwork, passion for achieving strategic objectives, and trust. For instance, commitment and passion for achieving strategic objectives are synonymous with the desire to turn a company into a successful economic player. At the same time, respect for teamwork and trust dictate the rules of cooperation and determine that all operations are transparent (Schwass, Hillerström, Kück, & Lief, 2011; Wasserman, 2012). Moreover, this case can be viewed from the perspective of industry standards, For instance, the volume of remuneration for work whether it is salary or share of the profits are relevant norms to mention. Here, emphasis should be placed on experience, skills, number of working hours, etc. (Clifford & Warner, 2012).
From this standpoint, founders and employees are stakeholders involved. However, it is imperative to realize that there are different categories of employees based on their competence and duration of employment by a company. So, relations between them make up the foundation of the primary ethical issue – should ownership shares be divided equally? This ethical dilemma is closely connected to the following problem: if benefits are equally shared, should risks, losses, and responsibilities are divided equally as well?
There is only one acceptable solution to this problem – creating a pyramid of ownership. The idea behind this principle is to grant the volume of own shares based on skills, responsibilities, job duties, and duration of employment (Spolsky, 2011). In essence, ordinary employees cannot have volumes of shares equal to those of founders and senior executives because they are less experienced and not exposed to liabilities. The framework for the division is the following: founders are the top layer of the company, receiving more shares than other employees. Senior executives are the second layer, having an average volume of shares. The next layers are made up of all employees. However, it is significant to point to their experience measured in years as the foundation for dividing ownership shares (McDonnell, Macknight, & Donnelly, 2012).
This option is ethically acceptable because it is a common organizational practice across the developed world. In fact, it is the basis of any organizational culture, as the increase of shares is inseparable with growing responsibilities (Mika, 2011). This decision has a positive influence on stakeholder relations and role of stakeholders in a company because they are informed that ownership distribution is proportional to duties and risks they manage.
References
Clifford, D., & Warner, R. (2012). Form a partnership: The complete legal guide. Berkeley, CA: NOLO.
McDonnell, D., Macknight, E., & Donnelly, H. (2012). Democratic enterprise: Ethical business for the 21st century. Aberdeen, UK: CETS.
Mika, A. (2011). The importance of codes of ethics. Hamburg, Germany: Bachelor + Master Publishing.
Schwass, J., Hillerström, H., Kück, H., & Lief, C. (2011). Wise wealth: Creating it, managing it, preserving it. New York, NY” Palgrave Macmillan.
Spolsky, J. (2011). Where Twitter and Facebook went wrong – a fair way to divide up ownership of any new company.
Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding pitfalls that can sink a startup. Princeton, NJ: Princeton University Press.