
At Chobani, Now It’s Not Just the Yogurt That’s Rich - ahmad19526
http://www.nytimes.com/2016/04/27/business/a-windfall-for-chobani-employees-stakes-in-the-company.html?_r=0
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mjfern
It's great to see a founder CEO (Hamdi Ulukaya) making a bold ethical move
like this to support his employees. It's not flashy or earth shaking, but it's
very real and it will definitely change many lives for the better.

This story reminds me tangentially of the time when Hewlett and Packard, when
faced with a downturn at HP, decided to cut pay across the board so the
company could avoid layoffs. Once HP recovered, I'm assuming they reinstated
previous salary levels and then some. HP then benefited from a highly
committed and skilled workforce who deeply respected their leaders and
company.

Unfortunately, these stories reflect the (very rare) exception and not the
rule. Today, we're much more likely to see CEOs and executive teams earning
(multiple) millions in salary and options, all the while they are outsourcing
jobs, implementing layoffs, converting full-time jobs to contract and part-
time jobs, and so on. These CEOs are extracting as much wealth as they can, at
the expense of their employees.

We desperately need more ethical, bold leaders like Ulukaya, Hewlett, and
Packard who are going to shape the future of business; a future that is
kinder, compassionate, and community-minded.

~~~
morgante
> This story reminds me tangentially of the time when Hewlett and Packard,
> when faced with a downturn at HP, decided to cut pay across the board so the
> company could avoid layoffs.

It mystifies me that cutting pay instead of getting rid of deadweight is seen
as noble or honorable.

If I were working at HP, I would have quit the second they decided to cut my
pay just so they could avoid needed firings.

~~~
mooreds
> If I were working at HP, I would have quit the second they decided to cut my
> pay just so they could avoid needed firings.

I sympathize with your viewpoint, but I think it depends on whether you see
dead weight. If you are on a great team with no dead weight, a pay cut to keep
everyone together would be far more palatable.

~~~
eru
Especially, if you get backpay later, or get at least more equity to make up
for the pay.

Even if that equity is depressed in value for a bit. `Bailing-in' creditors is
actually a common technique for financially struggling companies. Employees
are a kind of creditors.

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ae_keji
Honestly I'm surprised this doesn't happen more. While yes, it was a very kind
gesture by Ulukaya to give his employees partial ownership, it also makes each
of them much more involved in the long term success of the company. Putting a
company on the stock market is selling it to people who are only interested in
earnings for a few quarters at most, while employees will have interest in not
only the growth of the company, but the sustainability of the operation.

At least that's my impression of employee owned businesses, it seems like a
smart economic move.

~~~
taneq
Not to mention that hiring and training an employee is a significant
investment. Losing a bunch of employees at once, probably each with some
irreplaceable domain-specific knowledge, will cost the company in the long
run.

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andrewfong
> But unlike many of those tech companies, Mr. Ulukaya is giving his employees
> a piece of the company after its value is firmly established.

I wonder how they set this up tax-wise. Stock grants are income, even before
you sell. In tech companies, you typically get the stock when it's super
cheap, so the tax hit is minimal. But here, since the value's pretty firmly
established, the employee is potentially on the hook for quite a bit. And
depending on the details of the grant, it may not be possible for employees to
sell off their stock to pay taxes.

There are several ways to solve this. The employees could be getting options
(set up so taxes are deferred until they exercise). Or the company could just
eat the tax themselves. But kind of curious which route they took.

~~~
rhc2104
It sounds like the employees don't actually get the shares until a liquidity
event. (This is how RSUs work at startups.)

~~~
superuser2
The liquidity event for employees is months to years after the IPO (lockup
period).

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3327
Hamdi is an example ceo,

Here is some background information - don't grt me wrong the move is great but
as any great move there are a few more implications:

1) tpg loaned 750mn to bail out idaho plant to Ulukaya.

2) as part of the deal tpg has warrants against hamdi's own stock.

3) tpg try to oust hamdi once, the gidt cements his role as a ceo as employee
love and support to him is boosted.

4) tpg's warrants are diluted since hamdi gave out 10% of his own stock.
Essentially now the options can address 90% of hamdi's stock.

AGain a great chess move.

Your move tpg.

Edir: typos due to mobile.

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amalag
>TPG has warrants to buy 20 percent or more of Chobani’s shares, depending on
targets set in the original deal it struck. But that percentage would now be
calculated from the 90 percent of the remaining shares, after the 10 percent
given to the employees, essentially diluting TPG’s potential stake.

How did that happen? How would the 10 percent given to the employees not be
included in the 20% of the TPG contract?

~~~
r00fus
> How did that happen? How would the 10 percent given to the employees not be
> included in the 20% of the TPG contract?

From TFA: "He said that giving his employees a stake in the company’s success
was among the terms he demanded when the deal with TPG was struck."

~~~
BlackjackCF
God damn. What a great employer and a decent human being. This is how
businesses should be run.

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spir
Thinking back to the fellow who gave all of his employees a raise to $70K,
parts of that ended up going badly for him.

As a thought experiment, I wonder what might go well or poorly in this case?

The publicity is great. Employee loyalty from gratitude and vesting. It may
afford a near-term competitive advantage from capabilities like increased
willingness to work overtime or rallying together during an
opportunity/crisis. Real information may flow more freely as employees feel a
safety/pride of ownership and connection to management.

How will new employees feel about working alongside someone with much greater
compensation? Existing employees may immediately face this - since shares were
dolled out by tenure, employees with several years' tenure may see themselves
as rich vs. newer folks and vice versa.

As vesting completes, experienced employees may depart as they become
financially independent. Or perhaps the windfall will inspire lifetime
loyalty.

Will there be problems at competitors, whose employees are marginally less
satisfied, knowing their counterparts at Chobani are treated so well?

Overall an inspiring and kind program. I'm excited to see it play out.

~~~
morgante
I suspect that this is a much smarter way of rewarding employees than the
minimum $70k salary.

Profit sharing and employee ownership aren't really new concepts. Lots of
different companies have been providing such opportunities for a long time,
especially for senior employees, so it's unlikely to be controversial.

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enlightenedfool
"The number of shares given to each person is based on tenure, so the longer
an employee has been at the company, the bigger the stake." which is nice
compared to the usual class-based allocation.

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nwah1
I heard that the founder is Kurdish. Pretty interesting company.

~~~
55555
He is indeed Kurdish, from Turkey.

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abc_lisper
Tippin my hat, nicely done...

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dimino
Congrats, but I'm always blown away at the size of some companies. Do you
really _need_ 2000 people to make yogurt?

Airplanes are big complex systems, so I get that, but yogurt?

Edit: Apparently I rubbed some folks the wrong way. I didn't mean to think I
could do better, I just meant it's a wild thought that something so "simple"
as yogurt could require so many people to make.

You guys probably know about "I, Pencil", but it's a good read if you haven't
heard of it:
[http://www.econlib.org/library/Essays/rdPncl1.html](http://www.econlib.org/library/Essays/rdPncl1.html)

~~~
astrange
It must've taken a big marketing team to invent calling sugar "evaporated cane
juice" in the list of ingredients.

~~~
NoGravitas
Evaporated cane juice _should_ mean a product like panela or rapadura [1] -- a
dark brown unrefined (non centrifugal) sugar containing all of the molasses
from the original sugar cane. Unfortunately, in the US, there is no legal
constraint on how the term is used, and so when you see it on packaging, you
should read it as "sugar", or, perhaps more optimistically, "brown sugar".

[1]:
[https://en.wikipedia.org/wiki/Panela](https://en.wikipedia.org/wiki/Panela)

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dominotw
Chobani is poison. Insane amount of added sugar. Stay away from it.

~~~
BinaryIdiot
I'm not a fan of the taste of texture but I don't think I'd call it "poison".
Besides this is irrelevant to the conversation at hand as it's about the
company's stock redistribution not its product.

