There’s More to the Chobani Story Than Equity

Fred WhittleseyConscious Compensation: The Impact Compensation Blog


This week’s headline-of-the week in equity compensation and human resources circles is the story of the founder of Chobani (the yogurt company) granting shares to all 2,000 employees of the company.  This headline arrives timely in the midst of the presidential election themes of income inequality and various pay “gaps” (i.e., the purported “gender pay gap“); the looming public disclosure of the “CEO Pay Ratio” in public company SEC filings; and anecdotal tales of generous CEOs increasing base salaries far above the legally-mandated minimum wage or donating their personal company shares to employees.

The Chobani story is not just about granting shares to employees who potentially may become wealthy if and when the company is sold or taken public, the latter being highly unlikely.  Of course, there are numerous inaccuracies in the story, which is typical of New York Times articles on compensation.  From the headline “’s not just the yogurt that’s rich (sic)” to “…the transfer of money (sic) by Mr. Ulukaya” to “the shares are coming directly from Mr. Ulukaya (sic)” (which if true contradicts the statement that this action dilutes TPG’s stake in the company). It sounds from the story like the company’s major financier, TPG, may not be as thrilled with the employees and the New York Times reporter.

But the concept is what’s important.  A private company using equity to compensate employees, all employees, at a time and in an industry where this rarely happens and with a financing structure – led by private equity – that is not known for supporting broad employee ownership.  PE firms, in fact, are known for quickly concentrating equity ownership in the hands of a top few executives, true champions of the wealth gap and income inequality.

It sounds like Mr. Ulukaya fought quite a battle with a number of foes – private equity lenders and investors, his ex-wife, his own rapid expansion, and even mold contamination.  Now the fight will turn to the tepid IPO markets, waning merger and acquisition activity, the stalling of the private equity machine as equity markets flatten, and the ongoing hostility toward employee ownership by proxy advisory firms.

Not to be a buzz-kill for the Chobani rah-rah story, as the “white packet” received by employees is a great first step, but for every headline about the latest great idea there are the outcome stories that make the headlines too, without the rah-rah.