Buried in social gaming giant Zynga's IPO prospectus was an interesting disclosure:
[M]any of our employees may be able to receive significant proceeds from sales of our equity in the public markets after our initial public offering, which may reduce their motivation to continue to work for us. Moreover, we expect that this offering will create disparities in wealth among our employees, which may harm our culture and relations among employees.
This got me thinking about how other successful companies have dealt with the curse of rapid wealth.
The curse obviously isn't absolute. Microsoft
Even before great wealth is made, there are plenty of examples of executives being driven by far more than money. Stories of the early Facebook days paint CEO Mark Zuckerberg as someone who saw revenue, let alone profits, as a necessary evil. "We're definitely not in it for the money," he said in 2004. The early days of Google
But these folks are the exception. Ballmer, Ellison, and Zuckerberg are driven by factors beyond money because their companies are their babies. Being CEO of Oracle isn't Larry Ellison's job; it's his life, and his identity. That same drive isn't found in rank-and-file employees who are passionate about their work, but indifferent about their employer. Google gave each of its employees a 10% raise last year, in part a response to other companies poaching its key talent, luring them away with higher wages. "We want to continue to attract the best people to Google," said CEO Eric Schmidt.
Still, among employees who opt to stay put, newfound wealth isn't always a motivation killer. The book In the Plex gives a telling account about what wealth did -- and didn't do -- to Google employees after the company went public:
"Somehow there's this assumption that the people at Google made money and are going to retire on their boats" [said CEO Eric Schmidt]. "These people don't sail. Some of them do need to buy a house -- they've been living in itty-bitty apartments." …
Indeed, [the day Google went public] the people at Google were improving search quality, selling ads, and figuring out how to work the espresso machine -- not sailing. Six years after the IPO, an impressive number of Google's most important early employees -- executives such as Susan Wojcicki and Salar Kamangar and core engineers such as Amit Singhal, Ben Gomes, and Jeff Dean -- were still working hard at Google, even though they had the wealth of Saudi princes.
Often the biggest challenge is what wealth does to relations among co-workers, separating the veteran haves from the newbie have-nots. This is something Google indeed grappled with, as In the Plex describes:
Even the Google masseuse noticed the impact of money, especially when it came to the divide between early employees holding valuable options and those who came later. "While one was looking at local movie times on his monitor, the other was booking a flight to Belize for the weekend," she said in a book she wrote. "Don't think everyone wasn't aware of the rift."
The most important factor here may be whether the wealth the company generates matches its actual success. During the dot-com bubble a decade ago, people could set up a mock office in their mother's basement, pitch a shoddy idea to investors, go public, and make a million bucks inside a few months. Of course, the temptation to cash out and move on in these cases was huge -- there was no emotional investment. For a company like Facebook that has pounded through years of 24-hour coding sessions and now boasts 750 million members, the incentive to stick around and be part of something bigger than wealth is more alluring.
But let's be real. The economy stinks. Unemployment is 9%. Making your employees rich beyond their dreams might be a problem, but it's a nice problem to have.
What do you think? Let us know in the comment box below.
Fool contributor Morgan Housel owns shares of Microsoft. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Microsoft, Google, and Oracle. Motley Fool newsletter services have recommended buying shares of Microsoft and Google and creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.