Last week, newly-anointed Twitter CEO Jack Dorsey announced via tweet that he would give a third of his stock options, that's approximately one percent of the total issuance with a market value of $197 million as of October 28, to all Twitter employees.
While he still holds an additional two percent of company shares, this unprecedented act of generosity holds some valuable lessons for leaders.
1. He'll retain Twitter's most valuable asset.
There are a variety of assets that companies value, including intellectual property, exclusive customer contracts, unique service offerings, proprietary manufacturing technology and business processes or differentiated market locations. Those are all valuable assets but they require employees to maintain, enhance and commercialize that value.
Dorsey recognizes that his highly-skilled workforce is Twitter's most valuable asset in the long term, which is why he gave them the options grant as a retention incentive. An employee's options grant tends to be broken up into percentage blocks, with each block vesting annually over a set number of years.
It's an effective long-term incentive (LTI) tool that Dorsey selflessly shared to keep his people at Twitter and help keep them happy.
2. He boosts employee morale.
A company wide options grant can boost employee morale in at least four ways.
First, it gives employees an attainable performance target to align their day-to-day activities toward. Second, it transforms them from company employees into company owners. No one cares more about a company than an owner.
Third, it helps instill confidence in employees that they are valued and matter to the broader organization. Fourth, it can inspire a sense of esprit de corps that they're all in it together.
Leaders like Dorsey see the value of engaged and incented employees.
3. He is building a culture focused team.
Additionally, Dorsey's leadership by example sets the tone of conduct across the entire organization.
Employees will not soon forget such an uncommon demonstration of generosity towards them. They will understand that teamwork, generosity and consideration of others are all part of the Twitter DNA, and one leader was responsible for setting that tone.
4. He is telling investors they matter.
Whether it's a start-up raising venture capital or a publicly-traded company accountable to its investors, shareholders matter.
One of the amazing leadership aspects of Dorsey's gesture is that his block of options is not dilutive to current shareholders. In other words, Dorsey's stake in the company was already publicly disclosed, so the amount of his options grant was already factored into the stock purchase decision of existing shareholders who had already bought the stock.
However, Dorsey could have just as easily had the company issue a new block of six-to-seven million options for employees that would have been dilutive to shareholders. He didn't do that but instead pulled from his own resources. That's a remarkable example of shareholder stewardship and leadership.
5. He burnished Twitter's reputation.
Every leader is responsible for the reputation of the organization. Dorsey's selfless act has already resulted in a significant amount of positive media coverage and public perception.
Whether intended or not, Dorsey's $197 million gift to his "tweeps" is a significant deposit in the metaphorical "Bank of Public Goodwill." That can only benefit him and Twitter in the future should they ever need to make a "withdrawal" from that account due to an unforeseen crisis or issue.
While some may discount or criticize Dorsey's selfless action claiming he didn't do enough, the reality is that he didn't have to do anything for employees. But because he did, he deserves a lot of credit as a visionary leader who cares.
Who knows, he might inspire other leaders and CEOs to follow suit.