Equity - PCC - ebook

This book reveals dozens of companies in which employee ownership is simply the way they do business. Shows how and where these companies do things differently from traditional companies. Shows that this approach enables companies to grow faster and more profitably than others.

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Despite the fact that thousands of companies are now wholly or partly owned by their employees, many companies are still failing to pick up on the competitive advantages offered by employee ownership—faster growth, higher profitability and better resilience in times of economic downturn. A solid business case can now be made for the practice of making employees true partners in a firm's success by giving them a significant equity stake in the business enterprise.

Building a successful equity company, however, isn't just a case of letting employees buy stock and then living happily ever after. To realize the true benefits of this concept, employees have to see themselves as owners and create a different kind of workplace that aligns with that perspective. That means the culture of the organization must change and evolve as well. Furthermore, employees have to learn how to run the business differently if their ownership is to have any practical impact. Unless all three of these elements are present, employee ownership just won't deliver any tangible benefits.

More than just another option in the human resource department's kit bag of benefits, employee ownership has the potential to comprehensively transform ordinary companies. When employee ownership is combined with participatory management, businesses often move into and stay in high-growth mode. Employee ownership turns up in a very large number of influential and successful companies. Perhaps this isn't just a coincidence.

BackgroundEmployee Ownership as a“Performance Additive”

Employee ownership is something of a business phenomenon—despite the fact it is widespread and well received in almost every industry, many businesspeople still regard it as an oddity. What is indisputable, however, is the fact a disproportionate number of highly successful companies use an employee ownership equity model as the foundation for their entire businesses. That should make everyone pause and analyze the concept of employee ownership in more detail. In many ways, letting your employees earn an equity stake in your business can be the ultimate performance additive.

Consider these facts about employee ownership or part ownership of a business:

■ About 11,000 U. S. companies have an employee stock ownership plan already in place, covering about 8.8 million workers, or about 6 percent of the private-sector workforce. A further 2,200 companies offer 11 million employees participation in 401(k)plans that primarily invest in the stock of the company. Another 4,000 companies offer stock option plans to an estimated 10 million employees. About 4,000 companies offer 15.7 million employees plans that allow employees to buy stock at a discount. In all, about 39 percent of all employees are share owners and a further 17 percent are option holders.

■ Similar patterns are found in many countries. The United Kingdom, Spain and Italy have long had worker cooperatives which own companies. Employee ownership experiments are already underway in Australia, Egypt, Jamaica, Kenya and South Africa.

■ In many new market economies—like Poland, Russia, Slovenia and Hungary—the favored means of privatizing companies once owned by the state is to offer employees shares. A similar approach is also happening in China, where ownership of many thousands of businesses is passing from the central government to employee ownership.

■ Around 80 percent of the companies on Fortune’s“100 Best Companies to Work For”list have some kind of broad employee ownership program.

■ About one third of the companies on Inc. magazine’s list of the five hundred fastest-growing privately held businesses do the same.

In a study carried out by Professor Joseph Blasi and Douglas Kruse of Rutgers University over a thirty-year period, they found quite definitively that employee equity ownership does not detract from business performance. They concluded:

■ Companies that adopt an employee stock ownership plan get a 4 to 5 percent performance boost, and this higher productivity level is sustained in future years.

■ Employee-owned companies are more stable and less likely to lay people off in hard times.

■ Employee ownership leads to faster employment growth and higher rates of survival for companies.

■ When 105 public companies that adopted a broadly based(75 percent of employees)stock option plan were analyzed, these companies boosted productivity by 17 percent in the three-year period after implementation.

Despite all these success stories, the common perceptions are: