For a private, venture backed tech company, should i inform our employees on the total number shares outstanding so they can determine their fully diluted owneship? Or should the total number of shar

For a start-up I was associated with, we did the following - If people own shares based on their purchasing of the shares, then of course yes. If people own shares based on grants associated with sweat equity, then yes. If people own options (un-exercised) then making the info public should not be required, but should be provided when asked. Transparency is always the best course when dealing with investors.

The financial statements that you will more than likely be asked to publish for the benefit of your investors will include a statement of changes in owners equity, or some similar title. Even for private companies there will be some form of shares reconciliation needed as part of that financial statement.

You should contact the CPA firm who is helping you with your annual statements and ask them for the proper format. If they are issuing a compiliation report or review report or even an audit report, they will have the most current layout that is required under the SSARS or other guidance.

The calculation guidance might be part of the GAAP associated with Share Based Payments and from that you will determine the amounts to put on OE statement. Some of these items will hit your Cash Flow reconciliation as well where you are amortizing until pay out.

If you are instead relying on your VC to hire the CPA firm, then contact your VC and ask them to put you in touch with the firm doing the work.

This is an advanced topic so if you are uncertain, seek guidance from your CPA.

If they purchased the shares alongside investors then they should already know based on the offering terms. If they acquired shares through a restricted stock purchase plan or early exercise of options than I would still say yes. Presumably these employees were "granted" or given the shares as a form of incentive plan equity participation. If the employees dont know their percentage share of the Company they cannot relate any value to their investment so there will be no incentive impact.

I agree with the concept of transparency. Simon makes a great point: if you are giving your employees a benefit, but they cannot determine its value, then the value of the benefit as an incentive is severely eroded. One caveat: I would find out how the venture capitalists feel. My experience is that they want a motivated workforce and will want the information out there.

I also believe that transparency is important in order for your employees to clearly understand the value of the incentive that they are being offered. If employees do not have a clear picture of their diluted percentage, when a liquidity event does occur, that 'incentive' becomes a disappointment. Those employees who had a perception of a larger stake in the company can feel that they were misled and manipulated by management.

I totally support the commentators' endorsement of transparency. I cannot see why even the VC's would not want a fully engaged and informed employee population.