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Employee ownership is on the march

Finance | 23 Jul 2012

The government is so keen for public sector employees to create spin-outs, it provided a £10m support fund, and most recently a £19m fund for the public health sector. Iain Hasdell explains what these types of organisations are, and are not.

These are interesting and exciting times for employee ownership in the UK.

As chief executive of the Employee Ownership Association it is a great privilege to be so centrally involved.

Excesses in behaviour and remuneration in the UK PLC sector, compounded by the short termism of the PLC model and the consequences of that on the economy and the UK workforce, continue to motivate the search for, and celebration of, other forms of business ownership.

Employee ownership is now being embraced as the most prominent alternative to the over-dominant PLC model. But whilst interest is growing with great pace many are still unaware of what employee ownership really is.

Employee owned businesses are largely or fully owned by their workforces – either through direct employee share holdings or shares held in trust on behalf of and for the benefit of employees.

Their workforces are very actively engaged in the management and development of their businesses.

And economic competitiveness and high performance are a central part of the DNA of employee owned companies.

Although there are some exceptions employee owned businesses tend not to be social enterprises – that are organisations committed to social objectives and to investing profits they make into social causes.

Equally they are not usually co-operatives – that are organisations owned by their members and bound by a standardised set of operating principles.

Nor are they usually mutual organisations – as those generally are owned by customers (such as depositors in a building society).

Businesses that are owned by their employees contribute over £30bn to the UK economy each year.

And employee owned business tend overall to have higher productivity, greater levels of innovation, better resilience to economic turbulence and more engaged, fulfilled workers who are less stressed than colleagues in conventionally owned organisations.

Even a glance at the compelling success stories of employee owned businesses such as Gripple, Unipart, Make and Arup demonstrates the very special value of employee ownership.

There is widespread and growing endorsement in the business community of the power and contribution of employee ownership. And the government has become an enthusiastic advocate too. In the last few weeks there has been a very welcome wave of government activity on employee ownership.

The report of the independent Nuttall Review into barriers to employee ownership in the UK has just been released at a Summit on employee ownership chaired by the Deputy Prime Minister. A separate review of employee ownership taxation has been launched by the Chancellor. And the government is right now working through the recommendations of the recently published final report of the independent Mutuals Task Force on the barriers to growing employee owned/controlled public service spin outs.

The personal commitment to employee ownership of some key ministers, particularly Nick Clegg, Norman Lamb and Francis Maude, is there for all to see. However the goal that we must continue to ruthlessly concentrate on is to turn all this interest, excitement and activity into tangible outcomes.

That means business and government in partnership agreeing new, bold, practical measures to accelerate the growth of employee ownership. It also means keeping levels of ambition on the future of employee ownership very high. Only when employee ownership becomes an accepted and central part of UK industrial policy will it be time to relax.

In the meantime, whilst recent progress is encouraging, there is much more to do!

Iain Hasdell is chief executive of the Employee Ownership Association