Sweat Equity

Sweat equity (executive directors and key professionals):

It is the equity issued to the the employees and executive directors of a company in lieu of of their work for the company. It is the reward for contribution to the development of a company in non-cash form. In many cases members of a company contribute capital for the growth whereas others are spending time for the growth. Sweat equity has equal value as cash equity by distributing stocks or other forms of equity. As a businessman, if you are able to convince high cost employees or executive directors about the growth story of the company, they can wait to get rewarded. This provides sufficient liquidity to the company. It is very important for a business to have a talent pool at the top to manage the complex operations of the business, the complex relationships with stakeholders and the complex external business environment. If a businessman does not recruit or associate with competent professionals or does not associate with them because they do not have money to invest, he might have made a major error. Lack of sufficient top-level resources delays the fulfilment of various business activities and may have impact on viability of the business itself. In the issue of sweat equity, devaluation of efforts and time needs to be made. A proper contract needs to be signed retailing all the aspects of participative ownership.