“It can be true that nonfinancial ways to motivate people do, on the whole, require more time and commitment from senior managers and their own human frailties can
lead to managers “hiding in their offices” when overwhelmed by uncertainty about the current situation and outlook.
”
OWNERSHIP Another Perspective
EMPLOYEE by MIKE LISTON, OBE
Former CEO of Jersey Electricity, advocate of the “performance through people” principle and director of several PLCs and private and state-owned companies.
It’s an appealing claim, that the benefits of employee share ownership can deliver a host of benefits to companies and staff beyond just tax efficiency. But it’s not a universal truth.
In an economy comprising many small and medium sized enterprises such as Jersey’s, structured employee share ownership schemes like Employee Stock Ownership Plans, for example, can indeed provide benefits, including allowing the founders or owners of private businesses to withdraw from their business slowly over time or all at once, depending upon their needs. In this way, smoothed succession preserves continuity of
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governance, customer and supplier relationships and employee morale which can otherwise perish in a full sell-out by exiting owners.
It all sounds too good to be true. So why is it that only about 10% of employees in the US and Europe work in firms that offer such schemes?
The cost of accessing the tax and other financial benefits of ESOP schemes can be a problem because of their complexity and need of third party service providers for administration, valuation, trusteeships and legal services. So analysis of the costs and benefits is important. An ESOP can also create cash-flow issues, especially if the company needs to borrow money to fund the scheme and has to allocate significant future earnings to
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