Chobani Founder Plans to Share the Wealth

Chobani, a New York-based yogurt company with 2,000 full-time employees, recently surprised the workforce with

an unusual promise: when the company's founder, Hamdi Ulukaya, completed efforts to sell the company or take it

public (meaning anyone can buy shares), he would divide up 10% of his own shares among the employees. When Ulukaya

founded the company in 2005, he introduced the United States to Greek yogurt. Chobani's sales have now reached $1 billion

a year. Ulukaya said, "I cannot think of Chobani being built without all these people"that is, his employeesso the

ownership stake is a reward for making this success possible. Rich Lake, Chobani's lead project manager, sees it

exactly as intended. Lake calls the grant of stock "better than a bonus or raise." He told a New York Times reporter,

"It's the best thing because you're getting a piece of this thing you helped build."

In Lake's case, that piece is likely to be large. According to a conservative valuation, Chobani is worth $3 billion.

If all employees received the same amount of stock, each worker's stock would be valued at $150,000. But the division of the shares will be based on how long employees have

been with the company and their position in the organization. That means the earliest employees could receive more than $1 million each, and Lake was one of the first five.

Ulukaya's plan is unusual, not only because stock grants are more common in the high-tech than in the food industry. Also, this kind of incentive is more often given as away to recruit high-demand employees or to help a start-up compete with established companies in the labor market. In Chobani's case, however, the stock is being awarded

after the company grew.

So if the company isn't granting stock for the usual reasons, why is Ulukaya sharing his wealth? His comments suggest he is concerned about fairness. Along with paying above the minimum wage, he offered employees a retirement savings plan, but many didn't choose to save, and he worried about how they would do in retirement. Also, if the employees own part of Chobani, they are more likely to want its success to continue even after Ulukaya is gone.

Questions

1. What connections do you see between Chobani's grant

of stock and employee performance? What connections

would you expect the employees to see?

2. What would be some drawbacks of using this stock

grant as Chobani's main or only incentive pay? How

could Chobani correct for these drawbacks?