Employee Ownership

10 FRONT LINE STORIES ON HOW TO ATTRACT, KEEP AND DEVELOP GOOD EMPLOYEES At a time when employers are searching for new and innovative ways to motivate and retain key talent, employee stock ownership plans are proving to be powerful retention and reward strategies that have a positive impact on profitability, revenue growth, and productivity. Employee ownership is relatively inexpensive to initiate and it can help firms gain a competitive edge - the 15% advantage cited by of one of the CEOs profiled in this book. Employee Ownership: The New Source of Competitive Advantage vividly describes the advantages, challenges, disappointments, and triumphs of managers and employees of ten Canadian companies that have made the transition to employee ownership. It will serve as both inspiration and a roadmap to others looking for a new source of competitive advantage. Despite increasing interest in employee ownership programs, there is little available in the marketplace for owners, managers and employees that is accessible, with sound advice and techniques.

Employee Share Ownership Plans (ESOPs) are a powerful tool in a world in which it is no longer business as usual. Whether you want to attract and retain skilled workers, create a succession plan for your business, combat the "brain drain," recognize employee contributions, or need a way to turn your company around through improvements in productivity and morale, an ESOP could be the win-win solution for your company. An ESOP is a formal plan that allows employees to purchase shares in the company they work for. Employees think and act like owners because they actually hold a very real stake in the company. Not only are ESOPs financially beneficial for employees; companies that offer these plans also reap tangible rewards in improved motivation, communication, productivity, and profitability.

This book is intended to meet a range of different needs and to cater for different levels of knowledge about employee ownership. If you are considering making your company employee-owned or you are advising someone going through that process, and in either case are new to the topic, you can build up your knowledge levels from Chapter 1. Alternatively, the book can be used as a reference work if you have a particular question to answer. Some parts of the book will not be relevant to every reader. For example, several Chapters consider how employees can acquire shares personally: these will not be relevant to companies which intend their employee ownership only to be through an employee trust. The book is intended as practical guide rather than a highly detailed technical treatise. Its priority is to explain key issues in an accessible fashion and to raise awareness of where further exploration and advice may be important. Chapter 1 This Chapter looks at the background to employee ownership and why companies choose to become employee-owned. Chapter 2 Employee trusts are a key part of the structure of most employee-owned companies, as outlined in this Chapter. Individual share ownership is also introduced here, as some employee-owned companies combine ownership by an employee trust (which usually holds the majority of the company’s shares) with direct, individual ownership of shares by employees. Chapter 3 Chapter 3 goes more deeply into how employee trusts work and how the role of trustees as owners interacts with the role of the company’s directors. Chapter 4 In this Chapter, the key steps and decisions that will need to be made in establishing an employee trust are considered. Chapter 5 This Chapter starts to look in more detail at individual share ownership, in particular the ways in which employees can acquire shares personally, and provides a summary of the tax reliefs that are available for individual employees acquiring shares in their company. Chapter 6 Employee ownership trusts are a particular kind of employee trust, bringing particular tax reliefs. This Chapter considers these tax reliefs and the various conditions which must be satisfied. Chapter 7 Many companies become employee-owned through the existing owners transferring their shares to an employee trust. This Chapter looks at how to plan ownership succession in this way and some key questions that will need to be considered. Chapter 8 An employee ownership trust deed is likely to form the structural core of most employee-owned companies. This Chapter explains the key provisions that it will commonly include. Chapter 9 This Chapter considers the people issues which arise in a transition to employee ownership, and has been written by Jeremy Gadd. The next five Chapters look in more detail at how employees can acquire shares individually and may be of value to companies wishing to include individual share ownership alongside trust ownership. Chapters 10 and 11 look at two tax-advantaged all-employee share schemes. Chapter 10 The Share Incentive Plan (SIP) enables employees to purchase shares or receive free shares, in each case with relief against income tax. The SIP is an all-employee share scheme, which means that all employees must be allowed to participate in any offer of shares. This Chapter looks at the statutory requirements for operating a SIP and how it works in practice. Chapter 11 Save As You Earn (SAYE) options is another form of all-employee share scheme, under which employees can be granted options to acquire shares in the future and those employees who participate will save a monthly amount towards the option exercise price. This Chapter considers how SAYE options work. Chapters 12 and 13 look at tax-advantaged share schemes which do not need to involve all employees: Chapter 12 This Chapter looks at Enterprise Management Incentive (EMI) options. For companies wishing to create personal share ownership for their key people, EMI options will often be the best place to start. There are particular eligibility requirements for EMI options. These are considered in this Chapter, which also discusses the key elements of an EMI scheme, and offers suggestions as to how EMI options can be structured. Chapter 13 An alternative to EMI options is the Company Share Option Plan (CSOP). This Chapter considers how the CSOP works. Chapter 14 This Chapter looks at other ways in which employees can acquire shares personally. Chapters 15 to 20 consider other legal, regulatory and taxation issues. Chapter 15 Where employees are to acquire shares (or cash) from an employee trust, it is important to ensure that this is structured in a way which does not fall foul of tax anti-avoidance rules which were introduced to counter what is commonly referred to as disguised remuneration. This Chapter looks at these provisions and how to keep on the right side of them. Failure to do so could result in a charge to income tax and National Insurance on the value of assets even though an employee has not acquired any definite ownership rights over them. Chapter 16 This Chapter sweeps up some other legal and regulatory matters not directly covered in previous Chapters. Chapter 17 This Chapter covers data protection requirements. Chapter 18 This Chapter covers phantom shares. Chapter 19 This looks at the interaction between corporation tax, employee trusts and different individual employee share schemes. Chapter 20 There are a number of registration and filing requirements with HM Revenue and Customs and the Registrar of Companies. This Chapter considers these and some continuing administration requirements and summarises the accounting treatment of employee trusts and employee share schemes.

Employee ownership firms offer workers the opportunity to own a stake in the firms where they work. This affords them the ability to share in profits and have a voice in firm-related decision-making. In this comprehensive new book, Kurtulus and Kruse provide new evidence on whether employee ownership firms are better equipped to survive recessions. In particular, they focus on broad-based employee ownership, which includes ownership at all levels in the firm’s hierarchy. The authors begin by defining what is meant by “employee ownership” and then discuss the prevalence of such firms in the United States. They also examine how employee ownership affects employment stability and why employee ownership firms have survived recessions more successfully than other firms. Kurtulus and Kruse conclude by saying that the benefits they observed in employee ownership firms, particularly the greater employment stability and survival rates, can help the overall economy. Therefore, increased government support to broaden employee ownership programs is merited.

Using data from an extensive study of employee-owned companies in Ohio, where employee ownership is a well-developed trend, this book offers a strong empirical portrait of firms with Employee Stock Ownership Plans (ESOPs). It describes how these plans work and places their emergence and change in a historical context. John Logue and Jacquelyn Yates examine firms that have succeeded in employee ownership and those with failed plans. Some companies, they find, are committed to the concept of employee ownership, and others merely use ESOPs as a financing tool.Detailed information resulting from multiple surveys allows the authors to draw well-grounded conclusions regarding the question of why some employee-owned firms outperform others. The bottom line, they find, is that employee-owned firms that "do it all," implementing features such as employee participation and communication about finances, training, and cultural change, systematically outperform their conventional competitors. They also have an advantage over firms that understand employee ownership incompletely, if it all, and yet claim to adopt its methods.

Employee Ownership Through ESOPs: Implications for the Public Corporation summarizes the large body of literature on employee stock ownership plans (ESOPs) and the phenomenon of employee ownership. The author has discovered and reviewed over 700 articles on the subject in academic and professional journals of business, labor, law, and social science since 1973. The study is divided into four parts. The first part examines law, public policy, and regulation; the status of ESOPs in the publicly held corporation; corporate uses and labor-management roles; the impact of the ESOP on labor-management cooperation and the economic performance of firms; and the future of employee ownership. The second part presents selected case studies which illustrate the range of corporate uses and benefits to workers and the difficult issues these raise. The third part presents abstracts of articles or books that are central to understanding the major findings and implications of employee ownership and gaining an ordered introduction to the field. The fourth part includes references to these abstracted materials and to the subjects discussed in the first and second sections. This study emphasizes the significance of employee ownership to corporate officers, middle managers, union officials, and/or local labor representatives and employee leaders who are associated with a publicly held company.

The historical relationship between capital and labor has evolved in the past few decades. One particularly noteworthy development is the rise of shared capitalism, a system in which workers have become partial owners of their firms and thus, in effect, both employees and stockholders. Profit sharing arrangements and gain-sharing bonuses, which tie compensation directly to a firm’s performance, also reflect this new attitude toward labor. Shared Capitalism at Work analyzes the effects of this trend on workers and firms. The contributors focus on four main areas: the fraction of firms that participate in shared capitalism programs in the United States and abroad, the factors that enable these firms to overcome classic free rider and risk problems, the effect of shared capitalism on firm performance, and the impact of shared capitalism on worker well-being. This volume provides essential studies for understanding the increasingly important role of shared capitalism in the modern workplace.