Employee equity plans in small, medium enterprises
As business owners seek better ways to attract , retain and motivate key employees to lock in performance and build wealth, we find they often do not look at equity plans as a means to manage this – they have been long condiitoned to use income as the means to manage performance – pay increases, bonuses and overtime are the most common tools of employee performance management.
Thinking overseas is challenging this approach but we are dragging the chain in this area.
Almost 60 % of all adult Australians own shares ( either directly or indirectly via a managed fund or superannuation fund ) , but only 6 % of all Australian employees hold shares in the firm that employees them ( COMPARED TO OVER 30 % IN BOTH THE USA and EU ). Interestingly, in Australia – this is distorted against SME’s – According to ESODU research, 30 % of large businesses ( 100 or more employees ) , 39 % of companies with more than 50 offices in Australia and 32 % of companies with annual turnover of greater than $50M had employee share ownership plans of some kind. ONLY 8 % OF PRIVATE COMPANIES HAD ESOPs. Ten percent of companies with only one office in Australia and 9 % of small businesses ( 5 – 19 employees ) had ESOPs.
In a 2004 study seeking to assess how businesses with ESO plans regarded the effectiveness of their plans ONLY 1 % OF COMPANIES FELT THAT THE SHARE PLAN HAD BEEN “NOT AT ALL EFFECTIVE ” IN DELIVERING ON ITS OBJECTIVES.
Feedback from our clients who have implemented a plan is similar !
A few conclusions from this research data – while the incidence of ESO in Australia remains lower than in the UK and USA, it is now finally on the increase. Secondly, Australian companies view employee share ownership in terms of ptoential benefits to organisational culture and workplace relations and the additioanl benefits of taxation and succession planning funding are secondary.