Equity for influencers: modern value creation, old architecture

I have spent a very enjoyable few days at the IPEBLA conference here in Dublin.

Writing this piece whilst waiting for my flight back to Edinburgh, I have been reflecting on one of the plenary sessions I attended - Executive compensation: the evolution of equity participation from employees to influencers - and it got me thinking about how creaky our UK legal and tax regime is in the modern age.

A company can now be worth more because of someone who never signs an employment contract, never goes on-payroll and never attends an appraisal.

That has to be one of the more interesting tensions in modern incentive design.

We still tend to think about equity incentives through the language of employment. Options for employees. LTIPs for executives. EMI for qualifying employees. CSOP for employees and directors.

But modern value creation is increasingly sitting outside the traditional employment perimeter.

Influencers. Brand ambassadors. Strategic advisers. Athletes. Creators. Online communities. Affiliate networks. Independent developers. Fractional executives.

In some businesses, these people are not peripheral to value. They are value.

The payroll problem

The UK incentives regime is not irrational. It was designed for a world where tax-favoured equity was mainly intended to reward employees and office holders, while protecting the Exchequer from leakage.

But it is tired, old architecture.

It assumes a relatively stable relationship between company and individual, e.g.: join a business, work for the business, receive equity, stay for a period, benefit on vesting, exercise, exit, etc.

That still works for many employees.

But it does not map neatly onto a highly mobile, inter-generational and tech-savvy population where value may be created by people who sit in networks rather than organisational charts.

A creator may drive sales across three jurisdictions. A developer may build a platform’s ecosystem without being employed by the platform. A sports personality may create brand equity without ever becoming part of the workforce.

The commercial reality is becoming more fluid than the legal categories.

The missing middle

The difficult category is the non-employee economic contributor.

These are people who are not employees in the legal sense, but are not really outsiders in the economic sense.

These people may: increase enterprise value; build customer loyalty; reduce marketing spend; drive revenue; validate the brand; create network effects; and make the business more investable.

A sports nutrition business might rely on athlete ambassadors for customer acquisition. A consumer brand might depend on creators for relevance. A software platform might depend on independent developers for ecosystem growth. A legal fintech platform might rely on introducers, affiliates and trusted commentators to build distribution. Legora and Jude Law anyone? 

This phenomenon is not theoretical.

David Beckham generated enormous commercial value for brands, clubs and sponsorship deals that extended far beyond his formal playing contract. In many respects, the economic engine was not simply labour. It was audience, identity, network and brand amplification.

Modern creator and influencer ecosystems increasingly operate in similar ways, albeit at digital scale.

None of these individuals may be employees. But economically, they can look like part of the growth engine.

Non-employees are not excluded from equity

This is where the technical stuff matters.

Non-employees are not shut out of equity.

They can potentially participate in day-one equity, growth shares, warrants, stock options, phantom equity, contractual growth rights or trust-based participation.

The issue is more precise.

They generally cannot access the UK’s tax-advantaged employee share plan regimes, such as EMI, CSOP, SIP or SAYE.

They may also sit less comfortably within the exemptions, assumptions and governance models that are commonly used for equity incentive plans.

That means the structure has to work harder.

The technical questions become:

• Is this genuinely equity, or payment for services?

• Is the return more likely to be taxed as income or capital?

• Does any withholding obligation arise?

• Is there an employment-related securities issue because of a connection with employment or office?

• Are financial promotion or securities offering exemptions available?

• How is valuation supported?

• Who controls voting, transfers and leaver treatment?

• What happens if the individual is overseas?

So the point is not that non-employees cannot participate in equity. They can. The point is that they do not fit neatly into the UK employee share plan architecture and the surrounding legal, tax and regulatory scaffolding needs to be designed with more care.

Modern incentive design increasingly needs a toolkit, not a single plan rulebook.

The commercial terms matter

The harder challenge is often not whether influencers or creators can receive equity.

It is deciding what commercial behaviour the business is actually trying to incentivise.

Influencer economics can look very different from traditional employee economics.

A business may care about:

• audience growth;
• customer acquisition;
• subscription retention;
• brand engagement;
• territory expansion;
• product launches;
• social reach; or
• content production.

That completely changes the design conversation.

The commercial terms may need to address questions such as:

• Does the participant lose value if they stop promoting the brand?
• What happens if reputation damage occurs?
• Are there morality or conduct provisions?
• Is there exclusivity?
• Who owns the content and IP?

In many cases, the arrangement may end up looking less like a traditional employee share plan and more like a hybrid of equity, earn-out, royalty, partnership economics and brand licensing.

That is precisely why many off-the-shelf employee incentive structures struggle in this area. 

The bigger shift

The challenge is not recognising that external contributors create value.

Most businesses already know that.

The challenge is designing incentive structures that can align those contributors economically without creating unnecessary tax friction, governance complexity or cap table disorder.

That becomes harder as enterprise value increasingly sits in ecosystems rather than employment structures.

Influencers, creators, ambassadors and digital communities do not always fit neatly within the traditional assumptions underpinning UK share plans.

But commercially, they may still be central to growth.

Incentive structures were historically designed around organisational boundaries.

It seems to me that modern enterprise value increasingly sits outside those boundaries.