Corporate Governance and Employee Involvement

Cogs Machinery


When taking office as Prime Minister, Theresa May stated that one of her priorities would be to tackle “corporate excess”. Initial suggestions included the appointment of employee representatives to the boards of companies, but, once the practical difficulties involved in this were identified, this seems to be have watered down.


However, a Green Paper (consultation document) on the subject of corporate governance has today (29 November 2016) been published which addresses:

  • executive pay
  • strengthening the employee, customer and supplier voice
  • corporate governance in the UK’s largest private businesses

Views are invited on the following main topics

Executive Pay

  • how to hold companies to account on executive pay and performance
  • whether investors need to be encouraged to use existing powers
  • effectiveness of remuneration committees
  • better alignment of long-term incentive plans with long-term interests of companies and shareholders

Another measure under consideration is the publication of pay ratios, which would identify the gap in earnings between the chief executive and an average employee. Former Business Secretary Vince Cable proposed pay ratios in 2012, but the idea did not progress since the view was taken that the figures could be misleading. For example, an investment bank would almost invariably have a lower ratio than a retail business with a large number of lower-paid employees. And at a top football club, the employees would usually be better paid than the directors, but this would provide no insight into how well the business was being run.  In addition, a company which outsources most routine jobs is likely to have a lower ratio than one which directly employs the people carrying out those tasks.

Strengthening the employee, customer and supplier voice

  • how to take account of the views of employees, customers and other stakeholders at board level
  • whether any reform should be one which is legislative, code-based or voluntary

It is worth noting that businesses that are substantially employee-owned already provide employees with a significant voice, either at board level or, far more commonly, through an employee ownership trust (EOT) which has regular dialogue with directors. While the subject of employee ownership is outside the scope of the Green Paper, it is a concept which enjoys all-party support and would offer an alternative means of achieving some of the Government’s declared aims.

Corporate governance in the UK’s largest private businesses

  • whether the existing code for listed companies should be extended or a new code introduced for private companies
  • which companies should be within the scope of any new code
  • whether any new code should be underpinned by legislation or be voluntary

Responses to the Green Paper can be submitted before 17 February 2017 to:

Corporate Governance Reform Team

Department for Business, Energy & Industrial Strategy

3rd Floor Spur 1

1 Victoria Street

London SW1H 0ET

You can find a copy of the Green Paper by following this link

You can find further information about the employee ownership of businesses on our website where you will also find some animated illustrations.

Autumn Statement and Employee Shareholder Status



On Wednesday this week the Chancellor announced that with effect from December 1st 2016 the Government will abolish the tax advantages associated with Employee Shareholder Status (also known as shares for rights or ESS) as he considers that shares issued to individuals acquiring this status have been used for tax planning purposes.

The effect is that the income tax and NIC relief available on the award of shares to an “Employee Shareholder” will no longer apply, and the capital gains tax exemption on the first £100k of gain on the sale of shares by an Employee Shareholder will also be stopped, in each case for any awards completed after December 1st 2016.  In most cases, this means an immediate withdrawal because an award may only be completed at least seven days after the participating employee has been supplied with the award documents and then taken their own advice.  The Government statement said:

“The status itself will be closed to new arrangements at the next legislative opportunity.  This is in response to evidence suggesting that the status is primarily being used for tax planning instead of supporting a more flexible workforce”

ESS was introduced by George Osborne in September 2013, and involves an agreement between an employer and employee that the employee will surrender certain statutory rights of employment in exchange for free shares worth at least £2,000, free of income tax and NIC on the value of the shares awarded.

One attraction of ESS has been the facility to agree share value before an award with HMRC.  However, this remains possible with discretionary option plans (EMI and CSOP) and all-employee share plans (Share Incentive Plan or SIP, and SAYE options).

If you have been considering ESS for your business and are unsure of what else you can do to put in place an employee ownership or option plan, please do get in touch for a chat and we shall do our best to shed some light for you.

Guest Blog: Conversations In The Workplace



Most days, the Postlethwaite offices abound with conversation: banter between colleagues, discussion of technical points, knowledge sharing, phone calls with clients.  So when Claire James of Pivotal Moment suggested writing a guest blog about the importance of conversations in the workplace, we were intrigued.  And being employee ownership fans (and an employee owned business ourselves), we wanted to understand how the conversations in organisations where employees are also co-owners might differ from those in other workplaces.  Read on to find out….

Have you ever had a conversation that’s left you feeling frustrated and unable to respond appropriately and then spent hours ruminating on what you might have said differently to get your point across, or ‘fight your corner’?

Or maybe you’ve spent a meeting feeling ‘less than’, judged or excluded due to the conversations around the table…and therefore felt unable to make a valuable contribution to a project or an important decision?

If so, you are not alone. So what is happening in our brains to rob us of our faculties in the moment, and plunge us into introspection or a sense of ‘unworthiness’ for some time thereafter?

Well, we’re discovering that our conversations are chemical…And that the chemical cocktail produced in our brains effects our ability to think effectively, make decisions, connect with others, and to be creative, productive and resilient.  This chemical ‘soup’ is also integral to how we perceive our personal and positional power; our sense of autonomy and our place in the ‘hierarchy’.

At its worst, new evidence shows that the effects of a prolonged ‘high stress, low trust, cocktail’, not only incapacitate our best thinking, but can alter how our genes behave.  These altered genes may then even pass to the next generation, negatively impacting our as-yet-unborn children’s resilience to stress and anxiety.

This is a salutary consideration for an employer as it begs questions in relation to an organisation’s ‘Vicarious Liability’ for employees; can a ‘dysfunctional’ manager/leader negatively impact the lives of the unborn children of those whom she or he leads?  That’s what the science seems to be indicating. And if you allow this to happen, how might you and/ or your organisation be considered liable?

Our conversations therefore have enormous importance. They are at the heart of who we are, how we connect and how we perform. They determine whether our neural resources are available to do the work we’re being paid to do and they form the very fabric of the leadership and ownership culture of an organisation.

According to Judith F. Glaser, author of several books on Conversational Intelligence™, a body of work dedicated to moving organisations from ‘Power-over’ to ‘Power-with’ cultures; “Getting to the next level of greatness depends on the quality of our cultures, which depends on the quality of our relationships, which depends on the quality of our conversations.  Everything begins with conversations.”

Judith has identified 7 kinds of conversation and behaviours that move an organisation’s culture from ‘I-Centric’ to ‘We-centric’, from ‘Power-over’ to ‘Power-with’, whatever the ownership and/or hierarchical structure in place.  For the employee-owned business, where a team ethos tends to be more prevalent, this cultural style is a natural fit, so we would expect such organisations to experience more of these conversations and behaviours than the average business.  This is what Judith identified:


How is the conversation different?
What are the results?
From ‘Excluding’ to ‘Including’
Establishing a ‘We-centric’, ‘Power-with’ Workplace
From ‘Judging’ to ‘Appreciating’
Building partnerships
From ‘Limiting Aspiration’ to ‘Expanding Aspiration’
Focusing on aspiration
From ‘Withholding’ to ‘Sharing’
Harvesting Wisdom
From ‘Knowing Mindset’ to ‘Discovery Mindset’
Fostering Innovation
From ‘Dictating’ to ‘Developing’
Developing a leadership voice in all
From ‘Criticising’ to ‘Celebrating’
Releasing positive energy and neural resources

Why not take a few moments to run through this list, and consider how the conversations in your own organisation either foster, or inhibit these approaches and practices and what kind of culture they are therefore creating for you.  Conversations cost little, but their impact will determine both how productive you are and the quality of everything that you and your organisation do.

Claire James is Managing Director of Pivotal Moment, which specialises in ‘Interactional Intelligence’ for leaders and organisations. She is accredited to bring the highly practical and accessible frameworks and tools of Conversational Intelligence™ into organisations.  If you’d like to know more, please contact Claire on 0203 239 1334 or by email at

pivotal-moment-logo  conversational-intilligence-logo-jpg

Employee Share Schemes: Successful Outcomes


Small Group Workers

We have recently seen equity markets at or near all-time highs, which is good news for equity investors generally. It is, however, especially good news for participants in employee shares schemes whose interests mature at this time.

Earlier this year, it was reported that more than 55,000 Tesco workers would be sharing in a pool of £144.4 million as two of the company’s employee share schemes reached maturity. In simple terms, the amount invested had effectively doubled in value due to the performance of the Tesco share price over the last five years. It was understood that around 10,000 employees saved £50 a month for five years under the save as you earn scheme and would see their initial investment of £3,000 double to £6,000, with the additional benefit of tax relief.

This is especially noteworthy given the current economic downturn and the impact this has had on the Tesco share price. There are obvious benefits to employees and employers in such arrangements, and these share schemes have been known to improve loyalty amongst a company’s workforce.

There are now many similar save as you earn schemes in the UK with increasing numbers of employees taking up the option of putting away relatively small amounts of money each month for up to 5 years.

However, save as you earn schemes constitute only one type of employee share scheme, some of which have tax benefits.

More recently, it has been reported that employees of Royal Mail have become able to sell shares which they had been allocated free of charge under a tax-advantaged share incentive plan. If, however, they delay selling until 2018, they will be able to sell without paying any tax at all.

Additionally, while save as you earn schemes and share incentive plans are more prevalent in listed companies, private companies can also make use of tax-advantaged share schemes, such as the popular enterprise management incentive.

Click here to view an animated introduction to share schemes
You will also find further detailed information about the schemes available on our website here .

Moving employee ownership into the mainstream


At a time of little or low economic growth, the business of employee ownership is thriving.

You might already know that employee owned businesses contribute somewhere in the region of £30bn annually to GDP, more than agriculture, and using membership of the Employee Ownership Association (EOA) as an indicator, the sector is growing at approx. 10% per annum.

The sector’s biggest 50 companies employ 175,000 people, have combined sales turnover of £22.5bn and in the last 3 years, have collectively outperformed the UK economy in both.  And in 2016 there have been more transitions of privately owned firms into employee ownership than ever, as owners and founders chose the model to support their succession objectives or to help drive more business growth.

Employee ownership can be seen in all sectors of the economy; from the restoration of classic cars to the manufacture of play equipment and there isn’t a month goes by when another new business proudly announces its move.  And unlike other forms of economic growth which may have traditionally been centred around the SE, employee ownership can be found across the whole of the UK, sustaining valuable, regional based employment and stability.

But the UK needs more employee ownership.

The EOA campaigns for more employee ownership as we know that this is a sector which demonstrates more transparent corporate governance, higher levels of productivity, greater resilience and better employee engagement.

Through its broader ownership and governance, businesses that are employee owned act more responsibly to all of their employees, to the community in which they are based, to their suppliers and to their customers.  They think and act for the long term, invest for the future and are able to make a balanced response to market conditions, without the pressure of external shareholders who traditionally seek a short term return.

All of this is a pleasant contrast I am sure you will agree to the corporate behaviours seen in the likes of Sports Direct and BHS in recent months and a much needed antidote to the ‘anti-business’ response of some media commentators.

Notwithstanding the positive position that the sector finds itself in however, there is still much to do until employee ownership is truly part of the mainstream of British business and becomes as normal a thing to do as a trade sale or a management buy-out.

The challenge faced by the sector in order to become mainstream is however relatively straight forward.

It needs more and broader awareness of the benefits and opportunities presented by employee ownership for owners and founders, greater understanding of its economic value and business relevance for funders, the media and the advisory marketplace and the availability of more professional advisors able to support owners and founders who want to use the model.

In our experience of assisting hundreds of business owners through the journey towards employee ownership, it is clear that it is the trusted advisers, and in particular practice accountants, who are often a first point of contact for owners considering the long-term future of their company.  Whilst these accountants are duty bound to ensure they act in the very best interests of their clients, evidence from the latest research into the take up of the Employee Ownership Trust (EOT) model reveals that in too many practices, it appears there is a knowledge gap with regards to employee ownership.

These advisers are not only failing to offer a choice for owners, but those who choose not to explore the potential of employee ownership are missing out on a valuable opportunity to retain a significant proportion of their own client base. As unlike with a trade sale, where any existing client-adviser relationship typically comes to an immediate end post-transaction, facilitating the transition to employee ownership allows advisers to continue supporting clients for the long-term.

Therefore, it is my assertion that accountancy practices not only have a duty, but also a significant commercial opportunity to ensure that there is at least one member of their team with employee ownership specialist knowledge.

At a time when off-shoring is making headlines for all the wrong reasons, when the corporate governance of some of the UK’s big businesses is under scrutiny and as the UK looks for answers to its productivity puzzle, it has also never been more important for professional advisers to understand and support the growth of a sector which contributes so significantly and so positively to the British economy.

Forward thinking accountants who appreciate the current role and future potential of employee ownership in the UK economy are uniquely placed, both to help drive further growth and to capitalise on the opportunity for their own business and we look forward to welcoming more of them to collaborate with the EOA and its membership.


Deb Oxley, Chief Executive, Employee Ownership Association



To find out more about the EOA, please visit:

Twitter: @employeeowned

Facebook: / EmployeeOwnershipAssociation

LinkedIn: Employee Ownership Association