There's no reason why this is beneficial. Money and stocks are fungible you can freely exchange one for the other as much as your heart desires. There's no difference between which one you receive.
If your company is a shithole or fraud, then you absolutely do not want to be receiving company stock. But then, if that's the case you may want to re-evaluate working for it at all.
If that were the case and employees were compensated equally in stock vs cash, then yes there is no _rational_ difference. However, most human are not rational.
People like to take pride in their work and do a great job, this is amplified when they stand to directly benefit from their efforts. By enabling employees ownership in a company you're hoping to incentivize them to work harder and therefore amplify the return on their labor.
Even if this assumes an equal net present value, wouldn't the volatility of stock vs. cash make a very rational difference in expected future value? For people who are risk adverse, the cash would probably be preferred; for those who are less risk adverse, the opposite is probably true.
Most workers are not sophisticated investors and I'd rather they put excess savings into broadly diversified index funds instead of low quality equity in whatever small business they happen to be working at.
when the people in the article cash out their ESOP shares to buy a house... who's on the other end of that deal to buy those shares? is it some other employee? Wouldn't that mean that money is just switching hands between your employees rather than helping all your employees get rich?
related: i exercised some options for a startup that i used to work at a few years ago. they're now >10 years old and financially healthy, but no IPO in sight. what's the point of those shares if there's never an exit?
By enabling employees to be owners you grant them access to those profits and to participate in discussions around how to spend/re-invest profits.
We spend our profits in different ways. Some of it goes to future planning (bigger stock piles, larger cash reserves, growing headcount etc). Technically all our working capital, all our assets, all our stock, has been funded by "retained income".
That said we also pay bonuses (13th check) in profitable years , and we issue dividends to owners. The dividends can be significant. Or 0. Or less than 0 (salary deferred in bad years.)
We want long-term sustainability , but also returns for being owners (otherwise we might as well go get a job somewhere. )
Organic growth is fine, sales going up is good, but we're not looking for hyper growth.
There us no "exit" (for the business) on the cards. An IPO is out of the question, and having seen the destruction caused by corporate acquisitions that's not a route we like either.
It's not glamorous being a small business churning out regular profits. But it pays well.
Does that make more sense?