Employee incentives & equity – A Solution to funding?
A specific area of concern and interest is the utilisation of employee share plans and other employee incentives and equity plans to assist in funding and implementing succession. Australia lags behind both Europe and the US in the uptake of employee equity schemes (in all forms). Anecdotal evidence suggests this may be a substantial stimulus for implementing business succession planning and a substantial benefit to employer and employee alike.
In Family Owned Businesses the issue of equity to non family members has been a barrier to succession and so the utilisation of equity plans to fund succession may well provide the mechanism to suggest a solution.
In his 1998 pre-Budget report, the British Chancellor of the Exchequer, Gordon Brown, made a clear if unsubstantiated statement on the factors that enhance employee commitment to their organisations:
“Today, only a fraction of British employees and an even smaller minority of those outside senior management own shares in the companies that they work in and yet the evidence is that employee commitment is a vital strength for companies competing and succeeding in the global economy…and I want to remove, once and for all, the old ‘them and us’ culture in British industry. I want to encourage the new enterprise culture of team-work in which everyone contributes and everyone benefits from success…. We will make it easier for all employees…to become stakeholders in their company. I want to double the number of firms in which all employees have the opportunity to own shares. “
(Financial Times, 4 November 1998)
The Australian government has introduced various legislative measures to increase the uptake of employee share schemes though the effect has been uncertain to date.