Employees do not have to sell their shares back to the company unless there is a specific contractual provision to the contrary. Unless the stock has stated restrictions, employees will have voting rights on exercised shares. Although owners may be wary of the idea of a broad section of employees having voting rights, in fact employees rarely hold on to their shares after they exercise them. In addition, broad option grants almost never represent shares totaling a controlling interest in the company. Companies should be prepared for all of the consequences of broad employee ownership, however.
Employees often become active participants in the business and more engaged in their workplace.
If the company wishes to foster an ownership culture, particular mechanisms should be instituted to encourage long-term stock ownership. Employees often do not have the cash to purchase their options and usually must use a same day cashless exercise to get value from their shares. With this mechanism, employees often sell their total shares in order to realize gain on their options. These allow employees to hold on to at least some of the shares, while generating cash to pay taxes. All rights reserved.