Rant # 4 Company Stock Offering

Come May or June, most companies will offer their employees a chance to participate in what's known as the "Stock Purchase Program". This program allows employees to participate in the company's future by purchasing the firm's shares at a discount.

The perks offered range from matching contributions to a discount in the stock price, or some combination of both. But the outcome remains the same: You are now long your company's performance; as the company does better, so does the share price and your wallet (and vice versa).

The problem with that is... You are already long your company's performance. You work there! If the company does well in a given year, that will be reflected in your higher bonus and pay raise. If the company does poorly, well, so does your paycheck.

Here are two ideas on how to better the situation:

1. A company should give their employees a chance to own shares in a competing firm. As silly as it sounds, this idea will have far reaching consequences. For one, if the firm has a bad year, the employees will be less likely to run to the competing firm. They are already partaking in that firm's performance and are reaping the rewards of a higher stock price. Plus, they are enjoying those benefits without having to go through the grueling turn-over process.

In return for the money lost on purchasing shares of a competitor, the firm will reduce expenses by not having to pay for recruiters and training programs for new employees.

This is a win-win situation for me.

2. This one is a bit tricky. Let employees short the firm's shares at a premium. In effect, the employee is simply hedging his working there. If the company's performance is poor, the loss in the bonus will be counteracted by a gain in the short position. This idea is more for older employees who want to manage their bonus and salary risk.

By purchasing shares of your company, you are doubling your exposure and potential for loss. So, tread lightly and ask your H.R. representative if my ideas are right for you.

(This post does not apply to employees of Goldman Sachs)