The current employee ownership landscape is confusing with different models: direct, indirect & hybrid forms of ownership all coming under one umbrella of ‘employee ownership’. However a firm is only defined as ‘employee owned’ if ‘employees have a meaningful stake in the organisation underpin the structural organisation of the firm’ (Nuttall Review, 2012, The Ownership Effect Inquiry, 2018).
The Equity Project recognises that the real capital of business lies in the collective skills and brains of the whole business.
The Equity Project believes this is confusing, therefore is defining direct forms of employee ownership to workforce equity ownership.
“Workforce Equity Ownership is where employees directly own equity in the company thereby becoming members of the company and enjoy the rights that go with it.”
Important distinction between workforce equity ownership & the ‘John Lewis’ Model
Workforce Equity Ownership is distinct from the Employee Ownership Trust model (EOT), more commonly known as the ‘John Lewis’ model. Under the EOT model employees do not ‘own’ shares in the company as they are held collectively, workers therefore only receive a share of the profit.
Individually held shares (Workforce Equity Ownership)
As an individual shareholder, individual employees are able to invest and take pride in a business, developing a closer relationship to the company.
Greater incentive to innovate and add value, with personal shares contributions to the business feel more significant and important.
Individual workers have the agency to choose when to sell their shares and have the potential to have three sources of income: their income, shares and the dividends from them.
Greater feeling of adding value when making individual contributions than felt from within a collective.
Collective held shares (Employee Ownership Trust/ John Lewis Model)
As a collective shareholder, individuals feel anonymised into one of many shareholders.
They do not ‘own’ the shares, and subsequently only receive a cut of the profits.
While there may be collective pride, this does not amount to the pride felt through the individual financial independence and confidence.
Less personal relationship with the business, limiting the value added.
6.2%
increase in productivity
Year on year of the top 50 employee owned companies.
11%
increase in number of companies operating an employee share scheme
11,850 companies operated employee share schemes in 2017 - forms of direct equity ownership - up 11% from 2015-6.
10.1%
median increase in operating profits
Of the top 50 employee ownership firms in 2017. (RM2, EOA, 2017)