Jewels of Wisdom from Amazing Juul Bonuses

Jewels of Wisdom from Amazing Juul Bonuses

Over the holidays at the end of 2018 Juul, an e-cigarette company did something unusual. They sold a 35% stake of their company to a seemingly direct competitor, Altria, for $12.8Billion. While the transaction is significant, it isn’t all that unusual. But, what the company did with some of that money is pretty rare, although perhaps it shouldn’t be (more about that at the end of this post.)

Juul had 1,500 employees at the time of the transaction. As a condition of the deal, the company negotiated to allocate about $2Billion for company bonuses. Basic math tells us that the average employee received $1.3Million. However, in the world of compensation averages don’t tell an accurate story. Actual amounts were based on a combination of factors including employee tenure and actual stock held by the employee.

Tenure is an interesting component. Juul e-cigarettes have only existed since 2015. The company itself was a spin-off from another in 2017. So, while tenure may have played a factor, the difference between the maximum term of three years and the minimum of a month isn’t that big of a differentiator.

Stock owned is more likely to be a major factor. The company has not provided any details, but the distribution of stock is commonly very top heavy. The top 10-20% of employees generally hold the vast majority of employee equity. Often as much as 70-80%. This is where the math gets impressive.

  • If we subtract 80% from the $2Billion, we have $400Million remaining for the all-employee bonus pool.

  • If we subtract 10% of the staff assuming they make up the top group of people at the Juul, we have 1,400 employees left.

  • $400Million spread equally to 1,400 employees would still result in each employee receiving $286,000! If this is the worst case scenario, it’s a pretty great worst case! 

What can you and your company learn about this? 

1.     If you have value to an investor, take the time to include your staff at the time of negotiations. Juul is not the first company to do this, but far too few even consider it.

2.     In a world of 3% annual increases, it doesn’t take a $1.3Million or even a quarter of a million dollars to make an impact. A small, but material, bonus at the time of a transaction will help smooth over the chaos and extra work every transaction inevitably causes.

3.     Providing an interim form of liquidity is a great way to extend your “startup-ness.” Many startups focus only on the end goal and don’t take advantage of the power of interim wins.

4.     Lastly, it’s ok to do things differently. This type of program, and other unusual approaches will never show up as a data point on an industry survey. They will never be listed as a major trend in one of the big consulting firms annual lists. But they can be amazingly effective.


Don’t be afraid to do something different. FutureSense is here to help you brainstorm, guide, build and do when challenges arise. Contact us today for more information on the breadth and depth of our services.

  

To learn a bit more about Juul’s transaction visit here.

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