Hot topic: Worker share schemes, part two
Deborah Oxley and Keith Howells, November 12, 2018
Shadow chancellor John McDonnell recently set out plans that would oblige large firms to offer worker share schemes
The amount of share capital available would be capped at £500, with the remainder funding public services and welfare. Could such share schemes provide a welcome boost to worker voice and the UK’s productivity? Or do the plans go too far?
Deborah Oxley, chief executive of the Employee Ownership Association, says:
"While Labour’s intentions for wider wealth-sharing should be encouraged its proposals miss the opportunity to improve the UK’s productivity crisis. Mandatory share ownership is not employee ownership and making it compulsory will only force businesses to find ways to avoid it, as well as close businesses’ minds to the benefits of employee ownership.
"The Ownership Dividend report, the result of a year-long national inquiry into employee ownership, found that employee-owned businesses are more productive, have higher levels of staff engagement and are more resilient during periods of economic downturn.
"Rather than playing political football with the model, the three main parties should adopt a cross-party approach to create an economic environment that encourages and facilitates the formation of more employee-owned businesses."
Keith Howells, chairman of Mott MacDonald, says:
"Employee ownership is very good for employee buy-in and motivation – people are proud to be part of the ownership structure. The model works well for professional services firms like ours, where our value is mostly tied up in our people, but is less appropriate for those companies that are more capital-intensive.
"Our independence and employee ownership sit right at the heart of our culture, giving us the freedom to shape the future we want for our company. This means we can focus on what we believe is best for our long-term sustainability – without pressures from external parties driven by short-term gain.
"We believe this gives our employees a vested interest in achieving the best possible outcomes for our clients; as our long-term prosperity relies on keeping our clients happy.
"However, while the approach proposed by the Labour party seems aimed at encouraging better employee engagement, it is unlikely to motivate employees in the same way that encouraging them to invest in the business does – is it really any different to paying a bonus? There seems to be little evidence that the ownership structure proposed would really create greater efficiency and productivity, and it could have unintended consequences for some companies."