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Follow on Google News | Does Employee Ownership Help Build Better Companies?Deputy Prime Minister Nick Clegg has urged more companies to offer shares to their employees, saying it will improve productivity and unlock growth.
By: POSTLETHWAITE Law Firm DOES EMPLOYEE OWNERSHIP HELP BUILD BETTER COMPANIES? Deputy Prime Minister Nick Clegg has urged more companies to offer shares to their employees, saying it will improve productivity and unlock growth. This news release considers the evidence in support of his claim. A considerable amount of research has been done which seeks to answer the related questions:Does employee ownership create better companies and does it have benefits for employees? We summarise below the findings of some of the most recent research. Taken together, these show very clearly that employee owned companies have attributes that any ambitious company would value highly, and which translate into benefits both for the companies themselves and their employees. UK evidence HM Revenue and Customs – 2008 HMRC carried out research into EMI option schemes, SAYE options and Share Incentive Plans (SIPs) by HM Revenue and Customs, which found (amongst other things): • 79% of companies with EMI option schemes believed they had improved staff motivation and helped them retain key or skilled employees, with 71% believing their EMI options had improved company performance; • A majority of companies with an SAYE option scheme believed it had improved productivity and half of companies with a share incentive plan (SIP) saw a productivity improvement. Matrix Evidence (UK) – 2010 Matrix’s research into UK companies with significant employee ownership found: • Stronger employee commitment and job satisfaction • Improved financial and other rewards for employees • Employee owned businesses perform at least as well as those that are not employee owned and in some cases provide productivity gains • Employee owned businesses may be better placed to survive difficult economic conditions • Employee owned businesses may be better innovators as a result of having more committed employees Cass Business School – 2010 This research found that (amongst other things): • Employee ownership offers particular advantages to SMEs. Employee owned companies with fewer than 75 employees have significantly better profitability compared with non-employee owned companies of the same size. • Employee owned companies create jobs more quickly • Employee owned companies are more resilient – between 2008 and 2009 enjoying sales growth of 11.08% compared with 0.61% for non-employee owned companies HM Revenue and Customs – 2008 HMRC carried out research into EMI option schemes, SAYE options and Share Incentive Plans (SIPs) by HM Revenue and Customs, which found (amongst other things): • 79% of companies with EMI option schemes believed they had improved staff motivation and helped them retain key or skilled employees, with 71% believing their EMI options had improved company performance; • A majority of companies with an SAYE option scheme believed it had improved productivity and half of companies with a SIP saw a productivity improvement. Evidence from outside the UK Douglas Kruse – Rutgers University - 2010 This research into “shared capitalism” (employee share ownership, share options, profit sharing etc) found that over 100 previous studies showed that on average employee ownership and profit sharing is linked to better performance ( although in some companies performance was far better and in others actually far worse). Professor Kruse then went on to look at the Great Place to Work® companies and found the following: • Employee commitment and co-operation was strong in those companies with significant employee ownership, but highest in those with majority employee ownership • There was lower voluntary employee turnover –if combined with empowerment • It appeared that employee ownership helps the best firms do better. However, the research did not identify much strong evidence that executive stock options have very strong incentive effects in the companies examined. Fiden Ana Kurtulus – University of Massachusetts – 2011 Fiden Ana Kurtulus’s research found that employee owned companies have had more stable employment in the recession that began in 2008. Professor Andrew Pendleton – University of York – 2011 Recent research found that companies operating incentive arrangements that rewarded by reference to both individual and whole company performance tended to outperform those which either only had one of these incentive arrangements or had no performance incentives. Bryson (National Institute of Economic and Social Research and Centre for Economic Performance) Concluded that employee ownership overall led to: • Lower rates of employee turnover • Lower absenteeism • Greater effort by employees Arondo, Gago, Jones and Kato (Universities of Colgate and Mondragon, Hamilton College) – 2011 Studied the Mondragon network of co-operatives in the Basque region of Spain, in particular its retail distribution chain. It operates the Eroski hypermarkets and supermarkets , of which some have significant employee ownership (co-operatives) http://www.postlethwaiteco.com News release ends, 16 January 2012. ------------------------------------------------------------ Note for Editors: POSTLETHWAITE is a law firm which provides specialist advice on employee share schemes, employee share ownership and majority employee ownership, including EMI share options, approved options, long term incentive plans, Share Incentive Plans (SIPs), ownership by employee trusts and a wide variety of other share schemes. We look after clients from all parts of the UK, with a particular focus on smaller listed and private companies. For further information concerning employee ownership and employee share incentives, please contact Robert Postlethwaite on 020 7470 8805 11-15 Betterton Street London WC2H 9BP End
Page Updated Last on: Jan 16, 2012
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