Out-Law News 2 min. read

Trade body seeks views on business impact of employee ownership

Businesses and individuals have been asked for their views on the impact of employee ownership on UK businesses and the economy as a whole.

Trade body the Employee Ownership Association (EOA) is developing a report which will make recommendations to the government about how best to support the growth of employee ownership. The EOA, which has the support of the UK’s largest employee-owned business, the John Lewis Partnership, believes that more employee ownership will help to address some of the UK’s productivity challenges and improve corporate governance.

“As each stage of the inquiry progresses, we continue to uncover more evidence on the potential of employee ownership to answer some of the UK’s burning challenges: the even distribution of wealth, closing the productivity gap and growing the nation’s SMEs and independently-owned business community,” said EOA chief executive, Deb Oxley.

“In order to create a solid body of evidence about under what circumstances employee ownership is found and what benefits it delivers, we need to capture the insights, stories and accounts of employee ownership from the existing employee-owned businesses and employee owners of all sizes and in all sectors. These findings will be published in the autumn in a comprehensive final report; outlining in full the potential of employee ownership and its contribution to UK productivity growth and corporate behaviour,” she said.

The EOA has already held a number of oral evidence sessions across the UK, the feedback from which will be incorporated into its final report along with the results of its call for written evidence.

Companies that encourage employee ownership continue to outperform those that do not, according to the latest research by the EOA. The top 50 employee-owned businesses in the UK recorded combined sales of £22.7 billion last year, with a 10.1% median increase in operating profits. The same companies recorded a 6.2% year-on-year increase in productivity, compared to 3.4% average UK productivity growth over the same period.

The UK’s employee-owned businesses now account for 200,000 employees across over 300 businesses, with almost 70% of those being in either professional services or manufacturing, according to a recent survey by the University of Durham and the University of Leeds.

The EOA is asking employee-owned businesses for information about their productivity, performance and corporate governance practices, along with the reason they made the transition to employee ownership and how they fund their arrangements. It is also asking business advisers for information about the services they offer to employee-owned businesses. The call for evidence closes on 21 July 2017.

Share plans and incentives expert Graeme Standen of Pinsent Masons, the law firm behind Out-Law.com, said that the inquiry planned to explore some interesting themes.

“The EOA defines employee-owned businesses as those totally or significantly owned by their employees,” he said. “This is clearly an interesting and significant group, and one that has been growing in numbers and attracting more support and attention in recent years, especially since the efforts to promote employee ownership led by the Liberal Democrat side of the 2010-2015 coalition government.”

“Of course most businesses, especially large companies, are not employee-owned in the EOA sense - but even for founder and investor-owned companies, some of the themes to be explored by the inquiry will be of obvious common interest, particularly the impacts of employee ownership on productivity and performance and on governance and behaviours. Boosting productivity and fostering a performance-enhancing corporate culture are key goals for UK business at present. Even companies in which employee ownership does not reach a significant level should be able to secure similar benefits from broad employee participation in well-designed share plans,” he said.

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