The Ownership Effect is an independent inquiry into the advantages to UK businesses of having employee shareholders. The inquiry recently issued a Call for Evidence to try and substantiate the positive impact of employee ownership by capturing information from existing employee owned businesses and professional advisers. These responses will be incorporated into The Ownership Effect’s report on the development and support of employee ownership in the UK. In light of this inquiry, is employee ownership a vital benefit to UK companies or an unwelcome share dilution?
Benefits of employee ownership to UK companies:
There are various benefits to the relevant company, including:
- Due to the benefits to the employee (see below), the employing company will potentially attract better candidates, offering a unique benefit that cannot be matched by its competitors. That model will then also help retain these candidates, resulting in a reduction in staff turnover, and a growth in longer serving employees.
- By giving employees a “slice of the cake”, ownership makes employees invested in the company’s progression, harmonising the interests of employees and existing shareholders, as well as resulting in high motivation levels and increasing productivity. The Nuttall Review of Employee Ownership reported that these businesses are more resilient to harder economic climates, which is likely to be due to this inclusive culture.
- As employees will be recipients of shareholder announcements, communication between the employees and management will be improved, facilitating cooperation between them. The disgruntled feelings of employees being closed out of shareholder discussions will arguably reduce, creating a better partnership between management and their employees.
- Depending on how companies incentivise their staff, this structure may also have cash flow benefits. For example, salary increases and bonuses may be substituted with share incentives.
