Crown Service Systems Inc., based in Watertown, Mass., is not what anyone would call a glamorous business, but it is the pride and joy of Arthur Spilios, whose grandfather founded it some 50 years ago. Today, Spilios runs the linen and uniform rental company with his father and his brother. They have 200 employees and annual revenues of about $10 million, with sales growing at a healthy rate. It is, in short, a very respectable family business.
Which does not really explain why Spilios finds himself fending off suitors who want to acquire a piece of it.
The suitors are employees, including one of Spilios's managers. In recent years, they have approached him about becoming shareholders in Crown. Spilios, for his part, is not altogether unsympathetic. "We'd all like to own a nice house, and we'd all like to be our own boss," he says. Still, he finds it a little odd, the whole idea of offering minority shares in a small, privately held uniform rental company. "I don't know what they do at exterminator companies or fire alarm companies, but we don't print up stock and pass it around, and I don't know as we ever will."
Indeed, the situation is not without irony. There was a time, after all, when it would have been hard to give away shares in a company like Crown, even to employees.A computer company, maybe, but a uniform rental business? Not on your life.
All that has changed, however. During the past few years, employee participation in ownership has emerged as an important issue in just about every industry and every type of company -- in die-casting shops, steel foundries, airlines, bakeries, advertising agencies, industrial equipment suppliers, publishing companies, mutual fund organizations, radio stations, and on and on.
As might be expected, the trend is strongest in such places as California's Silicon Valley, where the passion for ownership has reached epidemic proportions. "Out here, everybody, including the janitors, expects to be an owner," says the president of a public relations firm in San Jose. But it can be seen in most other parts of the country as well -- even in the industrial Midwest, where basic manufacturing companies are finding it increasingly difficult to attract experienced managers without offering equity incentives. "I thought I was ambitious when I was in my early thirties and wanted to be president of General Motors," complains the chief executive officer of a manufacturing company in Illinois. "But I didn't expect to own it!"
This new interest in "owning it" comes at a time when the general perception of small, private companies is undergoing a radical transformation. The successes of such companies as Apple Computer Inc. and Federal Express Corp. have shattered the old view of small businesses as acquisition candidates, on the one hand, and quaint repositories of old-fashioned virtue, on the other. Now they are seen more as engines of economic growth and creators of economic wealth. The result is that owners of small companies suddenly find that they have something other people want and want desperately -- equity. And they can use that equity in ways that, a few years ago, they would never have dreamed possible.
Thus, for example, start-ups in San Jose, are able to lease furnishings for their offices, using stock, stock warrants, or stock options to help defray the cost. A young computer company in Mountain View, Calif., gets a reduced rate on its computer casings and its paint jobs by giving stock to suppliers. A medical equipment manufacturer offers stock options as incentives to distributors of its new pain-suppression device. An executive search firm in Cleveland specializes in finding managers for growing companies, and accepts stock as partial payment. The list goes on.
It is almost impossible to exaggerate what a change this represents in the small business environment. Ten years ago, an entrepreneur who offered a supplier stock options instead of cash would have been laughed out onto the street. Today, the supplier is often the one who makes the offer, and -- if a company is willing to spread around its equity -- it can wind up with all sorts of services without paying cash for them: free rent, free legal help, free accounting and public relations, even free operating equipment.
It is in this light some owners see the issue of equity participation by managers and workers.They regard employees as just another group looking for a piece of the hot, new action in small, growing companies. There may be some truth to this view, but the trend is clearly a little more complicated than that. Granted, it draws inspiration from such companies as Apple Computer, where a couple dozen employee-owners are reputed to have become overnight millionaires. Yet it also looks to People Express Airlines Inc., which requires every employee to buy stock in the company as a condition of employment, and to Weirton Steel Corp., in West Virginia, where concessions by the new worker-stockholders have recently helped what had been a moribund division of National Steel Corp. to return to the black. It is reflected in the productivity gains of companies with employee stock ownership plans (ESOPs), wherein an owner sells all or part of a company's stock to an employee trust. And it probably has something to do with the dramatic upsurge in start-up activity over the past two years -- a phenomenon fueled in part by ex-employees who realize that one way to get equity is to launch their own businesses.
This is not to suggest that the trend is all that well defined. On the contrary, it remains to a large extent chaotic, confused, and contradictory. Nevertheless, the signs abound that something important is happening -- something that could have a profound effect on the nature of business in America.
So what is happening, anyway? Clearly, one thing that is going on is that some companies have discovered how to use employee equity as a competitive weapon.
Consider Phoenix-based America West Airlines Inc. Like People Express, America West requires every new employee to become a shareholder in the company through the purchase of an amount of stock equal to 20% of his or her first year's base pay. The policy, says prisident and co-founder Mike Conway, "is predicated on the simple idea that if we're successful, there's enough for everybody. And if we're not successful and don't have profits, the whole thing comes apart like a cheap watch."
According to this theory, the key to success is motivation, and the key to motivation is ownership. At America West, the theory seems to work. "Every time I go out to the airport, I feel excited about what I'm a part of," says Mike Ehl, a 27-year-old customer service representative. "[Equity participation] creates a bond that joins people and makes us think and work harder together."
Says Conway, a former vice-president and controller at Continental Airlines Corp., "Those who frown on the complexity of doing things that make people enthusiastic are missing a bet."
Such sentiments are echoed at a $14-million-a-year food service company in Boston, where the founders have recently passed out stock options to almost half of the 150 salaried employees, from clerical personnel to managers of restaurant outlets. The effect, claims the CEO, is that all the employees "are breaking their necks" to make sure that the business stays healthy and continues growing -- even those employees who don't have the options but would like to get them.
And similar thoughts lie behind plans for a new incentive stock program for key managers at Unison Industries Inc., an $8-million aluminum die castings and aircraft ignition systems manufacturer in Rockford, Ill. "My goal is to have them watch out for the company's assets the way I do," says CEO Frederick Sontag, a 42-year-old Harvard MBA who spent a little over four years at Litton Industries Inc. He is in the midst of implementing a plan to give managers both stock options and the ability to realize an increase in their stocks' value through improved performance of the company.
The result, he believes, will be to make them act like owners, thinking day and night about how to make the pie bigger. "If [the company is] worth more and a guy has contributed to that," he says, "then he ought to get more than a paycheck."
There is, in fact, some statistical evidence to support such views on the practical benefits of equity participation. In 1981, for example, the Journal of Corporation Law published a survey focusing on the performance of companies with ESOPs. The survey found that the employee-owned companies achieved average annual productivity growth rates that were more than 1.5% higher than comparable businesses without ESOPs. Another study, done in 1984 under contract to the New York Stock Exchange, compared publicly held companies whose employees owned at least 10% of the stock to a matching group of public companies without such equity participation. The average sales growth of the former was faster than sales growth at 71% of the other public companies. The comparisons on profits were almost as impressive.
Not all owners base their support for equity participation on such practical business considerations, however. For some, it is a matter of principle, or personal preference. Indeed, one of the ironies of the current trend is that the most idealistic and passionate proponents of employee stock ownership are generally not employees, but founders, presidents, and CEOs.
One such founder is Larry Ellison, president and CEO of Oracle Corp., an eight-year-old software development and marketing company in Menlo Park, Calif., which ranked #61 on INC.'s 1984 listing of the 500 fastest-growing private companies in America. An ex-physicist, Ellison has granted each of his 225 employees options to buy stock in the company. (The specific number of shares depends on the person's job and length of employment.) Not that he thinks they need to be motivated. He simply wants everyone to have a stake in the company's success.
"It's a matter of personal preference," he says. "I would just rather be a member of the winning Super Bowl team than the singles champion at Wimbledon. I mean, suppose you win the singles tournament, who do you embrace at the end of the final match?" Ellison looks around. "Your racket?"
Joseph Nederlander, chairman of TicketWorld Inc., based in New York City, agrees. Ask him why he has provided equity to six of his key associates, and he will take you back 35 years to the night he first saw Arthur Miller's Death of a Salesman. "Do you remember that scene toward the end of the play?" Nederlander asks, meaning the one in which Willy Loman gets fired by the son of the man he has been working for all those years. ("There were promises made across this desk!" Willy says. "You can't eat the orange and throw the peel away -- a man is not a piece of fruit!")
With his four brothers, Nederlander has spent his life in the theater business, managing a family empire that includes no fewer than 10 theaters on and around Broadway. Nederlander was already in his fifties when he founded the fully computerized ticket company in 1979. The six young men he hired have made the business what it is today. So he has given them equity. "If I have a stroke and die," says Nederlander, "I don't want to have one of these guys coming in her and finding he doesn't have a job. How do you reward a young guy for loyalty? They gets so good, they can go other places. I hear them calling their wives at 9 o'clock to say they're missing dinner. They're giving their leisure time. . . . How do you say thanks to people like that?"
Then there is the founder of a commercial printing business in New England, who admits he set up an ESOP out of guilt. "I'm a product of the 1960s," he says. "For a long time, I was ashamed to be in business at all." Ten years after he and his partner launched the company, it had sales of more than $10 million and more profits than the founders had ever thought possible. They started the ESOP "to make the truck drivers, messengers, and salespeople more comfortable about working for us. We saw it as a nice little extra, another layer of security."
But owners like these are exceptions. On the whole, it seems to be competitive pressure, rather than personal belief, that is providing the main impetus to the employee-equity trend.
This is certainly the case in such technology centers as Silicon Valley, where companies are constantly under the gun to get their products developed and out the door. "We're asking for an extraordinary commitment of time and personal energy," notes Jim Fruchterman, a founder of Palantir Corp., a developer of a sophisticated document scanner and text processor, in Santa Clara, Calif. Giving people a shot at owning a piece of the company, he says, makes the sacrifice more palatable and may reduce turnover.
The same reasoning applies elsewhere, however, and indeed, entrepreneurs around the country are increasingly using equity to compete against larger companies for talent. Glyn Bostick, president of $5-million Microwave Filter Co., in East Syracuse, N.Y., for example, couldn't begin to pay salaries on a par with giants like General Electric Co. An experienced engineer at GE might earn 50% more than the $30,000 Bostick pays his top engineer. Consequently, Bostick offers stock options to key people and lets every employee buy public shares in the 16-year-old company at 20% below the market price. These opportunities correct the imbalance, Bostick believes. His chief engineer heartily agrees. "I could go into a larger company and be a lot more secure," says Bill Johnson, a 31-year-old electrical engineer. He earns less than he could elsewhere in salary, but after four and a half years he says he is still fired up about the company and its potential.
A similar approach has been used by a broadcasting company that owns 11 radio stations around the country. As the company added new properties, the three founders realized that they would have to hire experienced outsiders to manage the scattered stations. In order to attract high-quality people, they came up with a plan whereby a manager can earn up to a 5% interest in his station, provided he meets certain agreed-upon cash-flow levels in the first three years. When the station is sold, he gets his slice of the sale price. Meanwhile, the founders retain full control of the holding company that owns the properties. "We don't mind making other people wealthy if it's going to increase the value of what the rest of us own," says one of the founders. "The last thing we want these guys to do is fail."
And the scheme has, in fact, allowed the company to compete against the big broadcasters for the best talent around. "Offer them five points, and we can recruit anybody in the country," says the founder. "Equity," he adds, dropping his voice slightly, "is the new hot button."
Critics, of course, would argue that this particular button has gotten a little too hot.
Consider the case of the bright young job prospect who applied a few months back for a position at Charles River Data Systems Inc., a growing Framingham, Mass., computer company. During the interview with the personnel manager, he raised the subject of stock options. The personnel manager was happy to reply that the position in question came with options to purchase 1,000 shares at a price specified at the time of employment.
One thousand shares? The applicant was visibly disappointed, even annoyed. He allowed as how another company just down the road had offered him 5,000 shares. The personnel manager was speechless. Evidently, the candidate hadn't a clue that 1,000 shares in one company might constitute a larger piece of the action than 5,000 shares in another -- as was, indeed, the situation in this case.
Taking a cue from the incident, Charles River Data subsequently announced a stock split that would multiply everyone's shares by five. The chief financial officer recalls being bowled over by the response. "It was still the same company," he says. "Nobody's stake in the company had changed one bit. But people were stopping me in the hall and thanking me for what we did. One guy said we had done two great things for him. Not only had we split the stock, but his per-share purchase price would be one-fifth of what it had been."
The story illustrates a point made by many critics of the equity trend -- that, as passionately as they may want it, a lot of employees simply don't understand what equity is all about. "I am constantly struck by how highly people value equity these days," says Howard Stevenson, a professor at Harvard Business School. "It's beyond all limits of rationality."
And, indeed, many employees do exaggerate the benefits of equity, focusing on the promise and ignoring the perils, thinking only of the wealth it will bring. "Being an owner isn't all peaches and cream," notes one CEO who has worked long and hard to weather the competition while still meeting his loan payments. Nor does equity participation necessarily mean a bonanza for employees, as the owner of an industrial equipment distributor in Milwaukee points out. "We grew 47% last year, but people forget that we lost money in 1983. You don't have great performance all the time."
The critics also argue that employees tend to have inflated views of the rights and powers of minority stockholders. William Bierer, the owner of Essex Grain Products Inc., in King of Prussia, Pa., tells of a breakfast meeting he had last year with his general manager and director of marketing and sales. They had heard through the grapevine that two notorious competitors had made an attractive offer for the business. The managers were torn between fear of having to work for such people and fear of losing their jobs. For self-protection, if nothing else, they wanted to acquire an equity stake in the company.
Bierer listened patiently. He expressed sympathy, saying that he would feel the same way in their shoes. He also assured them that he intended to reject the competitors' offer. But then he reminded them that he still owned 100% of the company, and even if the employees acquired 49% -- a moot point since he wasn't about to let them have it -- they still could not stop him from selling the company to whomever he pleased."There is no such thing as job security for a minority owner," Bierer says with a shrug.
And yet, naive as some employees may be about equity, it seems unlikely that their naivete is what discourages most owners from offering equity. More often, reluctant owners express concern about a possible loss of control.
"Look, stockholders have rights; you've got to show them the P&L," observes one owner, the CEO of a successful service business on the East Coast who requested anonymity. "Now say you have a kid in college, and you want to start paying him $250 or $300 a week. Sure, he's not doing very much for the company while he's away at school, but he's helped out a lot during summers and vacations. I'm not saying we'd do it, but -- if I had other shareholders poring all over my books -- you know some of them would nitpick.Or it could be something else, like buying a company car. I mean, who needs it?"
Then there is the fear, voiced in all seriousness by one founder, that employee-owners might get uppity ideas -- like wanting to play golf on Thursday afternoons. "People don't understand about golf," he says. "Owners use time out of the office to make contacts and think.But you can't have all the Indians doing that."
And a few see even darker forces at work. "When employees talk about becoming owners," says a 55-year-old owner of a business he inherited, "not many of them talk about putting money in. They don't speak about mortgaging their homes. So what do they mean when they refer to 'ownership rights'? With those kinds of rights, you've really got a different type of system. And I know a lot of owners who will tell you what that system is. It's communism."
But not all the skeptics' arguments are so readily dismissable. Some, for example, question whether equity-sharing really works. The founder of a 15-year-old electronic cash register company doesn't think so. When he was starting out, he considered equity participation a great idea, and gave stock to a number of key employees. They now own 10% of his growing business, but he has soured on the whole concept. Their contributions would have been as great, if not greater, without equity, he says. Meanwhile, employees who don't have stock have become resentful. "In my mind, you can get just as much out of people by paying them. To some people, moving up the ladder means you can put your feet on the desk and do less."
An even more serious concern is that equity-sharing can actually hurt a company, blunting its competitive edge: "If you have other partners," says the founder of an electronics company near Boston with sales of around $15 million, "you have to pay too much attention to how things look, especially how profits look. But that's not always in the best interest of the company. I happen to believe that if you're not making mistakes, you're not trying hard enough." As the sole owner of his company, he feels perfectly free to sacrifice this year's profits for next year's growth. "If there are other people involved," he says, "I wouldn't be nearly so brave. They wouldn't let me."
And what of the politicking that comes with shared ownership? If crucial decisions are riding on the votes of employee stockholders, won't the CEO be spending more time persuading than managing? One founder winces at the idea of having to forge working alliances with minority owners over Sunday night dinners. Another dreads the thought of "attending 15 picnics and a barbecue."
But perhaps the most disturbing question raised by the skeptics is whether or not equity participation is even in the best interest of employees. "Suppose there's no market for the shares at the moment?" asks one founder. "How will people get their money out?" That can be especially dangerous, he argued, for employees who come to view their equity as a way to accumulate spending money, or to save money for a house or a child's college education. When the bills fall due, their only recourse is to liquidate their stock. And what then? How are they going to walk into the boss's office and tell him they've got to sell him out? "Owning stock can be a form of enslavement," this founder maintains. "To me, it smacks of Big Brother."
These are, without doubt, important issues -- issues that any company must confront in weighing the pros and cons of equity participation. They do not necessarily pose insurmountable obstacles to employee stock ownership, however. After all, owning stock does not have to be a form of enslavement. It only becomes one when the slaves are ignorant. Show them the truth, and it shall set them free.
That is, in fact, precisely the approach taken by companies that are serious about equity participation -- companies like Action Instruments Inc., a $20-million-a-year, closely held electronics manufacturer based in San Diego. Anyone at the 14-year-old company can become a shareholder after one year of service. To date, 160 of the 275 employees have elected to do so.They pay for their stock with their own money, usually through a salary-withholding plan. Whether or not employees buy equity, however, they receive a handbook called The Owners' Manual, which outlines the corporate goals and explains how the business works. In addition, sensitive weekly data about everything from orders and shipments to profits are posted, and regularly updated. Employees are invited to attend periodic sessions on strategy and teamwork. Lest anyone doubt that performance has tangible economic consequences, moreover, there is an in-house stock price, which is adjusted annually. Employees can sell their private shares back to the company for any reason. And the price, stresses CEO Jim Pinto, hasn't always gone up. Granted, it has never gone down, but it could. "That's the first thing we try to get people to realize: The price can go down," he says. "And if it's down, that's a signal to everyone that we have to work harder."
So slavery is by no means an inevitable consequence of equity-sharing, nor does expanded ownership necessarily represent a threat to management's ability to manage. The fact that a company places stock in the hands of employees simply does not mean that every (or even any) decision must be brought to a majority vote. On the contrary, management can, and usually does, retain full control of the decision-making process.
Take Vortech Corp., for instance, a young electronics testing company in Portland, Maine. About one-third of its 42 employees are either shareholders or have options. Philip Pasho, the founder, CEO, and largest shareholder, consults all the employees whether they have equity or not. Indeed, he expects everyone to participate in the consultation process on a day-to-day basis, exchanging information and ideas in his or her specific area. "And when it comes time to fish or cut bait," he says, "somebody has to be in charge and make decisions. I'm the CEO, and people understand that."
And what if there is a major policy disagreement?Pasho says employees aren't expected to agree with everything he does. But they do have to accept the power of management to decide. "If they can't deal with that," he says, "we'll show them the door." When someone does leave, the legal contract between the company and its employee-shareholders obliges Vortech to buy the unvested shares of stock at a price set by its board of directors. For the vested shares, the company retains the right of first refusal.
The point is that companies can govern themselves any way they please, and that right is not abrogated by establishing an employee-ownership scheme. In the real world, notes Norman Kurland, one of the leading authorities on ESOP's, effective managers usually discover that their lives don't change very much when employees own equity. As for all those picnics and barbecues, Kurland points out that "workers don't much like going to night meetings, either. Like everybody else, they want to go home at the end of the day." This is not to say, of course, that they don't want to know what is going on. They do. But in the last analysis, says Kurland, what they want above all is to be treated with respect and trust.
Indeed, it can be argued that equity is only a symbol, and an ambiguous one at that. After all, there are two distinct aspects to the equity question -- governance (control) and compensation (a piece of the action). Some founder-owners confuse the two, refusing to share the value-added wealth of their company on the grounds that they cannot, or will not, share the leadership. But, in fact, the two aspects are entirely separable.
One company that kept the distinction firmly in mind -- to the benefit of all concerned -- was Hill Holliday Connors Cosmopulos Inc., a highly successful advertising agency in Boston. Jack Connors and Jay Hill, the 50/50 owners, were adamantly opposed to giving anyone a minority voting interest. On the other hand, they did agree that, somehow or other, a way should be found to reward the agency's key people for their contributions to the agency's success.
Over a six-month period in 1982, the owners and other top executives discussed various ideas among themselves and with a consultant from Booz-Allen & Hamilton Inc., in New York City. They asked employees (there were about 250 at the time) about their short-term and long-term goals. Although the agency's salaries were competitive, most people were understandably keen on earning more money, and felt the owners, given several years of 50% growth, could afford to pay it. Among senior people, the single biggest worry appeared to be that Connors and Hill might one day decide to sell the agency out from under them, leaving them with nothing to show for their years of service, not even a job.
The two owners resolved to do what they could to meet their colleagues' fears and aspirations. They agreed that, each year, they would put one-quarter of the company's pretax profits in a bonus pool to be divided among all vice-presidents, senior vice-presidents, and executive vice-presidents (in effect, the top 40 to 50 employees). These cash bonuses are paid out in August, according to each individual's success in meeting his or her preset goals. They have generally averaged around 15% of a manager's base salary.
Over and above these yearly bonuses, the senior vice-presidents and the executive vice-presidents (about a dozen people) are eligible for long-term bonuses, paid out in four to seven years to encourage performance during that period. Finally, Hill and Connors agreed to compensate the top managers if the agency is ever sold -- in which event, the senior vice-presidents and executive vice-presidents (subject to certain specific qualifications of the plan) will get to divide up 25% of the proceeds.
If nothing else, the Hill Holiday experience shows that it is possible to address the concerns of employees without offering equity. All of which raises anew the question posed earlier: What is really happening here? If equity per se is not the issue, what is? What are the underlying concerns and forces that are fueling the equity trend?
The answer undoubtedly has something to do with another question, one that can occasionally be heard beneath all the arguments over means and ends. That question is: Who, in a flourishing company, actually creates the wealth?
According to the traditional view, wealth is created by those who, at the beginning of the enterprise, contribute the crucial time, money, courage, and genius that gets it off the ground. Another claim on wealth belongs to those who may contribute nothing but money. But that is the limit. Beyond the founders and investors, no one has a right to a company's wealth regardless of how much, or whether, it has grown in value.
This view is by no means indefensible. It is, moreover, sanctioned by centuries of practice. After all, the early risk-takers were present at the creation. It was they who lived by their wits, sacrificing their families, putting in 80-hour weeks, doing all the scut work, accepting all the anxiety, eating rice. At the very least, they stood by with their checkbooks. This lonely, arduous commitment to creat something is the very cornerstone of the system we call capitalism. Capitalism means that the contributions of founders and investors -- entrepreneurs of their efforts or their money, or both -- cannot be overestimated. It also means that they cannot be overcompensated. If it were not for someone's willingness to lose capital, waste effort, and risk failure -- sometimes devastating failure -- the business simply would not exist.
But there is another side to this story. You hear it every year at Christmastime, when the founder-owners of successful businesses stand up among their employees to acknowledge their gratitude, as they often put it, "to all you people who helped make this a great year," or "to those who helped us weather the storm," or whatever. Many (especially if it was a stormy year) express the sentiment only in words. Others hand out turkeys or bonus checks. A few go further and pass along the benefits of their growth, some fraction of the increased value of their businesses, in the form of equity or profit-sharing.
This gesture -- it is more than that, of course -- seems to come more easily to the chief executives of younger companies, especially those that demand high concentrations of talent. They and their employees are often young themselves; there is usually a certain social equality among them; and no one seems to suppose that founders should have sole claim to the fruits of an enterprise, at the expense of all the other talents a company needs to survive and flourish.
But the same logic applies in other companies, even those that have been in business for many years. "The risk doesn't end with the founding of a company," says the sales manager of a $20-million jewelry manufacturer. "The risk continues from day to day, month to month, and year to year. In a few years, this will be a very different business from what you see today." The corollary for him is clear. Although he has no stock in the company, which is wholly owned by an absentee family, he is convinced that he is, in a very real sense, one of its founders -- as much as, if not more than, the people who incorporated it over a hundred years ago.
Perhaps this, then, speaks to the real issue fueling the equity trend, an issue that is fundamental to the way companies do business. For what does it mean these days to be "in business"? More and more, it means that companies, and everyone in them, must constantly be able to change, to reinvent the way they do things, to make themselves new or risk seeing their fortunes fail. To state the matter simply, a successful business today must continuously be "starting up" anew, or else it is dying.
To be sure, a strong case can be made that it requires a whole different level of dedication and daring to found a company than to keep it going. Nevertheless, the process of constant renewal often does demand a higher commitment from employees than before, a commitment that goes beyond simply "doing the job." Many employees seem willing, even eager, to make it, but they increasingly expect a reciprocal commitment from the companies for which they work. If they don't get it, they look elsewhere.
Clearly, many companies are rising to the challenge. Some will respond by offering equity; others may find another way. But however they choose to respond, this much is clear: The companies that succeed in winning the loyalty and commitment of their employees today are likely to be the companies that succeed in the marketplace tomorrow.