Making employee ownership mainstream
29 May 2012
The Government wants to drive employee
ownership into the mainstream British economy. Field Fisher
Waterhouse partner Graeme
Nuttall was appointed the Government's independent
adviser on employee ownership on 8 February 2012. "I’ve asked
Graeme Nuttall to look at these issues in his review of employee
ownership, which will report back in July", said Nick Clegg Deputy
Graeme's remit is to work with Government to
identify the barriers to employee ownership and help find the
solutions to knock them down. Instead of employees only
having a relationship with their company as an employee, employee
ownership gives them an additional relationship as an owner.
Research shows how involving employees in this way promotes better
corporate outcomes. As well as, for example, improved productivity
and lower staff turnover, these outcomes also include more
accountability and corporate social responsibility.
Graeme has been consulting widely with
stakeholders. One of Graeme's
early conclusions is that the fundamental lack of awareness of the
concept of employee ownership is an obstacle. The reaction of many
is that the Government must mean executive share options or perhaps
using shares to provide tax free incentives. But employee
ownership means more than this. It means more than just
financial participation; more than introducing staff suggestion
boxes. Employee ownership is a distinctive business model in
its own right; as distinctive as saying we are a charity or this is
a franchised business. And the emphasis is definitely not on
shares for executives. As the Deputy Prime Minister made
clear in a speech to the British Chambers of Commerce on 15 March
2012 "we’re not just talking about a few members of staff owning a
few shares. We’re talking about a big chunk of the company
belonging to a significant number of staff". In a private
company this means around 20% or more of a company's shares and
could mean 100% employee control.
Ideas aired to address this lack of awareness
include improving education and training, so that different
business models get taught. The founders of recently
established employee owned companies such as Childbase and Parfetts
heard about employee ownership from examples set by others, such as
the John Lewis Partnership and not from their professional
training. Also raised is the idea that employees can require an
owner to consider a sale to them, if the owner is planning to sell
the business. An employee buy out may be a better alternative
than a trade sale as a succession solution.
There are core structural difference in an
employee owned company, namely employees will directly or
indirectly, that is via a trust, own all or a significant
proportion of the company’s shares. Some have argued that the
Government and other institutions, such as employment tribunals and
HM Revenue & Customs, do not understand employee ownership
business models and, in particular, the employee trust owned
business model, and that this leads to regulatory difficulties for
employee owned businesses.
These are typical of the issues Graeme Nuttall
is considering. If you would like to know more about Graeme
Nuttall's Government work please visit the Department for Business
Innovation & Skills webpage.
There is a dedicated mailbox for submissions: email@example.com.
Nuttall is head of the firm’s
Practice and leads the Equity Incentives and Charities and Private Client Groups at
Field Fisher Waterhouse LLP.