As we predicted 2019 is the year in which employee ownership becomes mainstream.
Last weekend saw an unprecedented level of media coverage on employee ownership. We look at what the BBC, Times and Financial Times have been saying and give our view on why employee ownership is capturing such wide attention.
The decision of Julian Richer to transfer the ownership of his successful hi-fi and television stores to an employee ownership trust has clearly caught the media’s attention.
Each of the following was published on Saturday 18 May:
The BBC, in an online feature entitled “The firms turning their workers into owners”, describes how 60% Richer Sounds has been transferred to an employee ownership trust. This will enable Julian Richer to save CGT on his £9.2m sale proceeds, although he is more than giving back the tax saving by paying a £3.5 million bonus to employees. From now on, they will also be able to receive an annual bonus free of income tax (maximum £3,600 per employee).
The Financial Times devoted an editorial to employee ownership. Injecting the right note of realism (employee ownership does not suit all circumstances), it recognises that it can raise productivity and growth, create a healthy longer-term business perspective and build a more inclusive capitalism. The FT’s view is that employee ownership should be voluntary and it has little time for the coercive version which has been advanced by Labour, under which all companies with more than 250 employees would build up to a 10% holding from which dividends would be shared between employees and government – a hybrid of employee ownership and nationalisation.
Then we had The Times, who have also given over premium editorial column inches to employee ownership. Their view is that the “greed is good” approach to business (as voiced by the fictional corporate raider Gordon Gecko in the film Wall Street), is plain wrong. The Times cites with approval Mr Richer’s view that the more rapacious brands of capitalism are toxic, that a good company does a lot more than simply provide profit to investors and that employee ownership will often both be good business and a great way for businesses to make a wider contribution to society.
The CGT and income reliefs that come with transferring your company to an employee ownership trust are attractive and are sometimes the initial reason why business owners look at this route to succession. But other reasons tend to emerge and take precedence:
- Employee ownership will create a strong platform for further growth
- The business owes much of its success to date to its employees, and will continue to do so
- Employee ownership is a fair way to reward commitment and talent
- A well-led employee owned company is able to think longer term, enjoy greater productivity and show resilience when times are harder
For more evidence The Ownership Dividend report explores this in more detail.
We welcome the attention employee ownership is receiving.
For more information about employee ownership click here