A CEO chooses equity-holding executives by way of a college fraternity-like system.
Deciding who gets a piece of the action in any company is no easy task. When Jim Scott, CEO of Bulldog Industries Inc., a $9-million Atlanta moving business and plastics company, decided to give key executives a cut of his company four years ago, his selection process was not unlike the time-tested college fraternity system.
Scott makes it clear to executives when he recruits them that after the first year or so, a candidate may be voted into the equity pool by the other -- now seven -- stockholders. Those chosen must pay dearly for their 1% to 3% of stock. "We figure out how much money someone has got, and then set the price high enough so they really have to sacrifice if they're going to be part of the team," Scott explains.
If stockholders want to quit, they must cash in their chips, and book value price is not an option. "They get what they paid plus interest," says Scott. "The ones who stick with me until the end are the ones who will benefit."