A Lesson From Steve Jobs On The Importance Of Business Equity Structures
Steve Jobs became a household name when Apple busted on to the technology scene in the 1970s and has since become a bit of a legend to tech enthusiasts around the world. Perhaps lesser known, however, is the tale of Steve Jobs getting ousted from his own company in 1985. This story teaches an important lesson about business equity – and how important it is to be properly structured.
Equity is a complex area with many legal considerations. Business equity refers to the value of the ownership interest or stake that the owners (or shareholders) have in a company. It represents the residual claim on assets and earnings of a business after all the debts and liabilities have been paid off. In other words, equity is what remains of the company’s assets after all debts and obligations are settled.
However, it is equity structures that safeguard ownership and allow ownership to be granted to others. Done properly, they can be a tool to supercharge recruiting, retain star talent and reward top team members. Done incorrectly, it can have negative tax impacts on owners and their team, can open them up to legal risk in the future and can even be used to kick them out of their own company.
Steve Jobs found this lesson out the hard way.
Jobs was difficult to work with and was extremely hard on his employees. He pushed people too hard, rubbed people the wrong way, and burned bridges to the ground.
In 1983, Jobs recruited the CEO of PepsiCo, John Sculley, to work for Apple, as board members thought Jobs couldn’t handle being CEO alone. After two new products failed to live up to sales expectations, Jobs began to clash with Sculley. A power struggle ensued, and Steve came out on the losing end – being fired from his own company.
If the business equity structure had been built correctly, Jobs would have still had his job – and that would have made a BIG difference.
When the company went public in 1980, Jobs owned about 11 percent of Apple. After being fired, he angrily sold off all but one of his shares, saying he didn’t have faith in the company’s leadership(Jobs kept the single share in order to access investor reports). Had this not turn of events not happened, it is estimated that an 11 percent stake in Apple, a company today valued at around a trillion dollars, would now be worth about $330 billion. If that doesn’t teach you a lesson, nothing will.