[Elecraft] OT--Re: Odd Question [Elecraft history]

[David Yarnes]

Some private companies may do that, but not many, and not that much.  There 
are significant potential problems to doing that.  The most obvious is to 
avoid diluting family/closely held control, which may not be a problem if 
such awards are minor.  However, it also exposes the company to problems of 
how to deal fairly with these shareholders, since there is not active market 
for the stock.

A much bigger problem is that, if you get too many shareholders (and it 
doesn't take all that many), you can become subject to the need to file with 
the Securities and Exchange Commission (SEC).  That can be quite onerous. 
This is a big incentive for companies to "go private"--to avoid the need to 
go through all the extra compliance, etc.

The most common way to get around all this is to issue what is called 
"phantom stock", or "shadow stock".  These are merely certificates that 
entitle the holder to share, at some usually defined rate, in dividends and 
stock value (value being determined by formula).  There are typically no 
voting rights, and it's not real stock ownership, thus no capital gains 
benefit when you cash out.  Since it's not real stock, there are no SEC 
rules to worry about.

So, you usually have to look pretty hard to find a private company that uses 
real stock for bonuses or other compensation.  Those that do, do it probably 
only for a handful of critical employees.

Dave W7AQK




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Tom, N5GE said:
Not being public may be one of the reasons they are so successfull.  Outside
stockholders can make life miserable for companies like Elecraft.

Many privatly held businesses award uotstanding employees stock as rewards 
for
their service.

Tom, N5GE