Equity

Why Employee Ownership is Good for Business

by Corey Rosen, John Case and Martin Staubus (14900)

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.

The three essentials of an employee equity business model:
1. Size: Enough equity that it will impact on the employees’ finances.
2. Culture: Employees must be encouraged to think and act like owners.
3. Understanding: Employees must understand business disciplines and commit.

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.

Equity