Shareholders invest in an organisations future, some
for the short and others for the long term – but don’t employees also ‘invest’
in an organisation? They invest their time, talent and most importantly their future;
though admittedly get paid for that commitment. Common sense would seem to
suggest that if employees were also shareholders, there might be a greater
commitment to ‘the future’ – something that should benefit the employees and the
shareholders.
Nick Clegg, UK Deputy Prime Minister, said on 4th July 2012 that "more employees should be in the driving seat and own a share of the comapny they work for." This was after a new report by government adviser Graeme Nuttall found the main barriers to increasing employee owned companies were a lack of awareness, lack of resources and concerns about how complex it was to set up this kind of business. Businesses like the John Lewis Partnership, which is owned by its workers and distributes its profits between them, are seen by Nick Clegg as a key way to improve productivity and unlock economic growth.
Maybe more organisations should consider employee
ownership?
There are numerous employee owned organisations in
the UK and US, including companies like; Alliance Holdings (13,300 employees);
Brookshire Brothers (6,000 employees); John Lewis Partnership (81,000
employees); Parsons (11,500 employees); Savant Limited (40 employees); Tullis
Russell Group(800 employees); WinCo Foods (14,000 employees), for example.
David Brodwin recently wrote that “the words ‘employee-owned
business’ once evoked an image of small shops with lofty ideals but sloppy
business practices. But today, employee-owned businesses like the John Lewis
Partnership deliver impressive results, raising the bar for the rest. They show
greater resilience in a recession. They earn loyalty from customers and
suppliers. They move nimbly in tough markets. Insights from today's leading
employee-owned businesses can be applied broadly, pointing the way toward a
more robust and sustainable economy.”
Marjorie Kelly writes in her book “that the John
Lewis Partnership is part of a paradigm shift from ‘extractive ownership’ to
‘generative ownership.’ - where extractive ownership puts short-term financial
gain above all else and generative ownership returns economies to their
original purpose, which is to advance human well-being.” Marjorie highlights
how the John Lewis Partnership certainly fits the generative model; where its
stated purpose is the ‘happiness’ of its staff, which results from worthwhile
and satisfying employment in a successful business.
There are three basic models of employee ownership:
1. All the shares are held permanently by the trustees
of an employee benefit trust, as in the case of the John Lewis Partnership.
2. All the shares are owned by the employees
individually.
3. A combination of the two.
In practice "the 100 per cent EBT shareholding
is a popular option," says Graeme Nuttall, head of equity incentives at
Field Fisher Waterhouse. "The structure is easier to administer and there
is no need to keep buying and selling shares as and when staff join or leave
the company."
So is it time for a radical change in business
ownership with a significant shift towards employee owned organisations and
might such a move help organisations minimise short-term risk and global
fluctuations; as well as give greater support to long-term sustainable growth.
If, as is often stated, employees are the life-blood
of an organisation, then surely it’s time to genuinely recognise that and
‘reward’ them accordingly – where reward isn’t just basic financial reward, but
the ability to proactively contribute to the day-to-day organisational
trade-offs between short and long term decisions; as well as risks and rewards.
There are dedicated centres that promote employee
ownership; in the US you have the National Centre for Employee Ownership and in
the UK the Employee Ownership Association.
When shareholders pressurise organisations to
achieve short-term profits that aren’t in the interests of the other
stakeholders, (especially the employees), pressures that can hinder sustainable
future growth; you have to ask if the basic shareholder model isn’t partially
responsible for the global economic mess the world has found itself in. Maybe
it’s time for a more employee-centric approach to organisational ownership
where the stewardship resides with those who ultimately decide the future of an
organisation – the employee.
References:
Brodwin, D. (2012). Why we need more employee-owned
business. Economic Intelligence. [On-line].
Coleman, A. (2007). There’s no place like own.
Director Magazine. [On-line].
Kelly, M. Owning Our Future: The Emerging Ownership
Revolution.