Equity means ownership. It can also mean justice or fairness. There are many types of equity in business. But they’re almost never just or fair.
Story: Actors’ Equity
American theater performers have a labor union called Actors’ Equity. It’s been around since 1913, when actors in New York City first started battling with theater owners for better pay.
Like many unions, Actors’ Equity’s goal is to help its members get better (fairer) salaries and benefits like overtime and health insurance.
But this is different from financial equity. Actors don’t get a share of the profits from successful shows like Hamilton or Wicked. Those profits go to the businesspeople who have the financial equity. They own shares (equity) in the production, which gives them a share of the profits.
So why bring up Actors’ Equity?
Because financial (ownership) equity is like a performance, too. There’s lots of acting, drama, and uncertainty that goes along with it. And the more money is involved, the more drama there is.
There’s a hierarchy in equity ownership, just like the acting world with its megastars and supporting actors and stage hands. There’s different classes of ownership with different rights and claims on pieces of the profits. The more equity you own, the more clout you in have negotiating with the other owners, and the more likely you are to make lots of money.
All this comes with lots of drama. When people buy or sell equity, it’s a big performance. People try hard to convince you that the equity is worth a lot when they’re selling it to you (because they want you to pay a lot for it), or not worth very much when they’re buying it (because they don’t want to pay you very much).
So while Lin Manuel Miranda might have the star power to negotiate for ownership equity in his next production, he should sweat the details and hire really good advisors. Because when it comes to financial equity, businesspeople can be great actors too!