What’s a Handshake Worth?
2010-09-01 · By Editor
by Jason Kulpa
Most businesspeople would scoff at the idea of doing business based on a handshake. In today’s litigious society, many deals that have been inked on paper and reviewed by teams of attorneys are still contested in bitter court battles. However, there are still a few stories of entrepreneurs doing the right thing simply because it is the right thing to do. I’d like to think that I’m one of those entrepreneurs.
For more than four years, I owned Ad Authority, a business that helps other businesses reach millions of motivated consumers looking to acquire a product or service. After years of personal and professional success, I made the decision to sell the company. I was ready for a change of pace. After entertaining several offers, I finally found a buyer I could trust.
On 10 April 2007, I signed the final documents for my business to be acquired by Morlex, a direct-to-consumer Internet marketing company. Signing those documents represented the end of an amazing journey for myself and my teams” one that had continually tested our patience, skills and perseverance.
In the beginning, my 10 employees took a chance on me, and the company, with only a verbal promise and a handshake. I promised to give them job security and a great environment in which to excel. When we started out in 2003, my staff shared a 600-square-foot room with desks crammed together. They were barely able to move, let alone work comfortably. By and large, our inauspicious beginning was a 49-month-long journey across oceans of adversity. But I had assured everyone early on that if they stuck by me, they wouldn’t regret it. As an entrepreneur, you’re only as good as your word. I intended to honor my promise.
In January 2008, Morlex had officially committed to acquiring my company. At that same time, the financial markets went into a horrible slump. As a result, the purchasing process was delayed and the deal looked to be on the rocks. In return for our patience, Morlex granted me an extra 1.5 million shares of stock valued at around US$5 a share.
I knew the value of the stock and was tremendously excited. I also knew the value of my team and how hard they had worked to get the company to this point. I had already built in a cash component amounting to nearly US$800,000 to be dispersed among my staff when the deal closed, but I really wanted to show my appreciation for their years of service. Remembering my handshake and promise, I decided not to keep a single share of the additional stock.
Instead, I granted it “without any strings attached” to every full-time employee based on tenure. I had made a commitment to honor their perseverance, and I wasn’t about to go back on my word. By relinquishing the additional stock, 14 employees shared more than US$8 million. They earned every penny of it with their trust and hard work.
In the current realm of business, contracts are seemingly made to be broken. I come from a generation that when people shook your hand and looked you in the eyes, it was a deal. And that was all you needed.
This experience taught me that to excel as an entrepreneur, and to maintain a productive and committed staff, I had to hold myself accountable to my own promises. The fundamentals of business would only get me so far and it would all be pointless if I didn’t embody my own principles.
Jason Kulpa is CEO and Founder at Underground Elephant