This morning Fortune reported that Square CEO Jack Dorsey is returning 10% of his shares to the company. Dorsey’s share of Square is 30% and the portion he is returning equals about 3% of total equity.
It’s pretty unusual for a founder to hand equity back to the company. After all, they are the ones who took the early risk, and most of us can agree they earn the rewards a successful company brings.
Instead the portion Dorsey is returning will open up shares for potential hires and acquisitions, without the dilution that normally comes with those things. Dorsey told Fortune that he hopes to encourage employees to take risks.
One of the principles we hold fundamental here is that an idea that can change the course of the company can come from anywhere in the company. I hope we are building an organization that is not dependent on one person or a group of people who were here in the early days.
Okay, let’s be honest. Thanks to his role at Twitter, Dorsey is already a billionaire. And, his 27% stake in Square still equals around $877 million. He’s been in the realm of FU money for awhile now.
Which is kind of the point. Dorsey is running a very successful company, and there are on-again, off-again rumors of a 2014 IPO. People are willing to come work at Square, and other shareholders understand that dilution is part of the equation. There’s no expectation for Dorsey to give back equity.
Still, at the Square holiday party, Dorsey announced that he’s returning a large number of shares back to the company. The move signals that he cares more about the company than his own (admittedly, already considerable) wealth. It’s a brilliant way to enhance company culture and create a large number of very loyal employees. Who wouldn’t follow a guy like that?
Fortune suggests that some will see it as PR to cover Dorsey’s less-than-stellar showing in the Nick Bilton book Hatching Twitter. The truth that such a move would help his personal image would never have escaped an entrepreneur as savvy as Dorsey, but he insisted to Fortune that it wasn’t the driving force behind his decision.
The less than flattering press is about a time at another company, and I can’t let that define this company and I can’t let that define my future.
Honestly, though, who cares what the underlying motivations are? Dorsey’s move will help his employees, both current and future, and it won’t really hurt him any. In that situation, it just seems like a win-win if he also garners some goodwill he may have lost.
Merry Christmas, indeed.