Turkish native Hamdi Ulukaya, the CEO of Chobani, is a Turkish-born CEO of Chobani. He answers questions during an interview on November 17th on November 17th at the Chobani headquarters in New York. If the company goes publicly traded, an equity program that benefits employees could enable certain workers who work long hours to get a massive payout. (Don Emmert/AFP, via Getty Images
For many, the vast profits from public offerings make you
think of software engineers, not yogurt factory employees.
However, if Chobani goes publicly, the company’s hourly employees could earn at least $1 million in stock awards. This is an exceptional result in a business that is rarely is praised for its treatment of employees.
This week, a Norwich, N.Y.-based company submitted
the U.S. Securities and Exchange Commission paperwork for an initial standard offering. The company also referred to its unusually generous equity plans to remind employees of the benefits employees can expect to earn.
Five years ago, Chobani founder and CEO Hamdi Ulukaya —
the billionaire “yogurt king” who has stated that he is following an
“anti-CEO strategy” and is valued at $2.1 billion according to Forbes
estimates–sparked controversy after he made the gift to employees. The company’s 22,000
full-time employees were awarded shares that could amount to 10 percent of the company’s value when it went public and was sold.
The award received the attention of many, in part the
Rita McGrath, an instructor, and author of Columbia Business School, because “it is unique in this industry.” Although some manufacturers are offering shares to blue-collar workers, and despite “endless amount of research that suggests that when you treat people with respect and pay them fairly, it will result in better performance,” McGrath says–it’s still not widely used in many industries.
“Unfortunately, many employers treat their employees
as apathetic robots, which is not the best approach,” she says.
Chobani didn’t provide many specifics when the award was
announced in 2016. However, it was reported by the New York Times that
allowed interviews before when the decision was announced said that shares were determined by the length of time. At an estimated value of $3 billion, it estimated that the median payout for employees could be $150,000. Likewise, the first stakes of employees could be as high as $1 million.
Today, Chobani announced in the prospectus that it was expected to earn $1.4 billion in revenues in 2020, which was up from its previous year as losses doubled during this time and are believed to be valued at a price which could exceed $10 billion, as per the July report from Reuters. According to Corey Rosen, founder of the National Center for Employee Ownership, the non-profit membership organization, it could also increase the stakes of employees.
“It conveys a message about what the company’s views
are about their employees,” Rosen says, noting that Chobani’s method
differs in comparison to an Employee Stock Ownership Plan that is where the
a trust holds the shares. They are given over time, and employees get the value at
the time they leave the firm.
A Chobani spokesperson could not respond to any questions
regarding the plan to issue shares and the silence period before an open listing. In the announcement, Chobani said that its directors and employees have the right to be awarded the benefits that the participants can later exchange with cash or shares of its common stock.
The program, as the prospectus says, “consists of
awards to all full-time employees, thereby granting them an investment in
Chobani’s future contribution to the value” and is an integral part of
Chobani’s “people-first philosophy.” It has introduced the first wage
at $15 an hour by 2020 — the average is about $19 per hour in the prospectus.
It also offers an unpaid parental leave of six weeks to all employees from 2016.
Ulukaya, an Immigrant from Turkey famous for purchasing
the 80-year-old yogurt plant and turning a small dairy business into a giant dairy company that now produces vegan creamers and ready-to-drink coffee beverages have claimed that he adheres to an “anti-CEO” strategy. In the course of a TED talk titled “How Chobani Founds the Culture War, ” he mentioned sharing awards, saying, “some claimed it’s P.R. Some people said it’s a present. I told them it was not. I saw it. They’ve earned it through their skills and dedication to their work. I can’t think there’s any other way to do it.”
In the same speech, the speaker called the idea that
business exists to increase profits for shareholders “the most absurd idea
I’ve encountered in my lifetime. In reality, businesses should be focused on
the needs of their employees before all else.” Ulukaya appears to have
acted on this after this month signing a Delaware publicly benefit company. This corporate structure indicates it is meant to operate sustainably and responsibly and could protect itself from lawsuits by shareholders.
Although Chobani’s strategy isn’t widespread outside the tech industry, the concept has gained some attention in a private equity sector niche. Pete Stavros, a partner, and co-head of America’s
private equity division at KKR, says that the private equity firm has given stock to blue-collar employees of 11 industrial firms in which it had an interest over ten years. For instance, the 16,000 employees at the manufacturer Ingersoll Rand were granted shares in 500 million.
Stavros says that in the firms that have implemented the
procedure, “people are more committed to their work. They’re less likely
to leave. They’re more optimistic about the future.”
The company is mulling how to apply the method together
with other companies and is a partner in creating a new non-profit that aims to help businesses adopt a system that allows many employees to have access to shares of the company. “I believe that this is where the world is heading,” Stavros says. “Capitalism isn’t going to last as long as stock ownership in the way it is now.”