Owning shares in the company they work for gives employees an extra stake, and when their company performs well they benefit too. Share plans work best as part of a full programme of employee engagement. As well as dividends and probably capital gains, employee shareholders can vote and the [Employee Share Ownership (Esop)] Centre is working closely with the UK Shareholders’ Association to make it more easily possible.
Recently, both the Chancellor of the Exchequer, George Osborne, and the business secretary, Sajid Javid, have attributed the share price performance of Royal Mail to the efforts of its 135,000 employee owners. By way of thanks, the government gave employees an extra £50m of stock.
Last year, a joint London School of Economics and National Institute of Economic and Social Research (NIESR) study, S hare plan survey results 2014, provided strong evidence of the positive effects of employee share ownership for employees and employers. The study surveyed the employees of Computershare in nine countries and found that, compared with non-members, people who were in the company’s employee share plan identified more with the company; worked beyond their contractual hours; had lower levels of absence; and were less likely to look for a job with another organisation. This suggests an association between thinking like a shareholder and the approach to work that creates higher productivity.
The tumultuous economic times of recent years have put some employees off share plans. Employers should not give up since contributing to a plan is usually a favourable or one-way bet. In the case of a sharesave scheme, if the share price goes up employees gain; if it falls they get their savings back with interest.
There’s a risk that employee share plans become too normal; no more than a corporate accessory. Part of the Esop Centre’s role is to keep the idea fresh and to remind everybody that employee share ownership for the millions, instigated by companies that share the benefit, are an idea worth getting excited about. Published quarterly, our Esop Index, FTSE calculated, shows just how much better companies perform when employees have a financial stake.
Malcolm Hurlston CBE is chairman of the Employee Share Ownership (Esop) Centre