So the simple question is, if an employee does not own any part of the company, are they entitled to a share of the extra profits?
If the employees want to be entitled to a share of the extra profits then one obvious solution is that they need to become shareholders. Normally a share of owner’s equity is given in exchange for money. Instead of buying those shares with money, that’s what startup employees are doing when they take a lower cash pay in exchange for shares in a company that is unable to pay them full price.
I see your argument, but we’re describing a situation where a full-priced if not handsomely paid employee takes zero risk with a steady “what they want in cold hard cash” salary and then when the company does extra well they are entitled to a share of the upside.
I can recognize that giving employees a share of profits may very well be what businesses need to do in 2019 to recruit and retain the best talent. But their salary is what was agreed upon for the work to be done. So let’s call it for what it is — it’s something nice to do. It may even be a talent-recruiting and talent-retention tool that gives your business a competitive edge. But it’s not a financial obligation.