Opinion: Employee ownership – Giving employees a reason to succeed

by Contributor14 Mar 2017
HR managers who want happier employees and stronger companies with a healthier bottom line should consider taking a plan for an employee ownership scheme to their next C-suite meeting, new research has shown. Angela Perry outlines what's involved

In addition to higher levels of staff engagement and retention of key workers, companies with a strong employee ownership culture command a share price premium of 17% over their publicly listed peers.

Staff with a stake in the company are also more aligned with management when it comes time to make difficult decisions. 

How do we know all this? The new Employee Ownership Australian (EOA) Index, which was launched last month.

An initiative of Employee Ownership Australia, the EOA Index tracks the share prices of listed companies with high levels of employee ownership (EO) and compares them to the ASX200.

In the past five and a half years, the share price of the EOA Index companies increased by 40%, compared to just 23% for the ASX 200.  

There is a strong link between companies with a robust employee ownership culture and their environmental, social and governance (ESG) standards, according to research by corporate responsibility analysts CAER.

And they are twice as likely to show clear evidence of equal opportunity systems and to outperform or match the ASX 200 in three out of five social sustainability factors. 

Employee ownership delivers numerous advantages to companies and this latest research shows clear productivity improvements.  

Computershare’s employee share plan has been in operation for nearly 15 years. A recent share plan survey conducted by Computershare indicated share members are more loyal to Computershare, are more willing to work overtime and take less unplanned absence. 

“Our employee plan is a key pillar of our People strategy, aligning staff behaviour to shareholder interests, and resulting in more motivated, satisfied and loyal employees.” says James Marshall, Managing Director of Computershare Plan Managers.

Investors also benefit from employee owners who are more engaged, and more focused on gender and diversity, training, job security and sustainability.

Julia Leske, CEO of CAER, says a healthy employee ownership culture is attractive to responsible institutional investors.

“CAER’s research shows companies with employee ownership schemes also have better social and equal opportunity standards.

“This is particularly important to fund managers that incorporate ESG into their investment considerations.  

“Responsible investors should be looking for companies with high levels of employee ownership because their broader social sustainability performance is better,” Leske said.

To be included in the Index, companies need an employee ownership scheme that is open to all their workforce, with at least 30% of employees participating. Fifty-two companies from the ASX200 meet this criteria. The share price of this cohort of companies is then tracked against the full ASX200. 

Like the ASX 200 index, the EOA Index is weighted by market capitalisation. The index was designed to ensure a large company or a single industry could not overly influence the results.

About the author
Angela Perry is the Chair of Employee Ownership Australia and New Zealand and is a qualified English Barrister and Australian qualified solicitor. She has more than 18 years consulting experience in the fields of equity plan design and executive compensation practice. She is a member of the Prime Minister's Community and Business Partnership.