Accounting Principles, 11th Edition

Feature Story

Owning a Piece of the Action

Van Meter Industrial, Inc., an electrical-parts distributor in Cedar Rapids, Iowa, is 100% employee-owned. For many years, the company has issued bonuses in the form of shares of company stock to all of its employees. These bonus distributions typically have a value equal to several weeks of pay. Top management always thought that this was a great program. Therefore, it came as quite a surprise a few years ago when an employee stood up at a company-wide meeting and said that he did not see any real value in receiving the company's shares. Instead, he wanted “a few hundred extra bucks for beer and cigarettes.”

As it turned out, many of the company's 340 employees felt this way. Rather than end the stock bonus program, however, the company decided to educate its employees on the value of share ownership. The employees are now taught how to determine the worth of their shares, the rights that come with share ownership, and what they can do to help increase the value of those shares.

As part of the education program, management developed a slogan, “Work ten, get five free.” The idea is that after working 10 years, an employee's shares would be worth the equivalent of about five years’ worth of salary. For example, a person earning a $30,000 ...