ESOPs are not a fable 


May 2000

Employee share ownership schemes
Book Review

In his new Tribune pamphlet, 'Ownership for the Many not the Few  Denis MacShane MP looks at how Employee Share Ownership Schemes (ESOPs) can give employees more say in how their firm is run.  Most people have little say in what their employer does. If they are in a Trade Union, they will have a little.  Despite recent trade union reforms the balance in the workplace is still heavily weighted against the employee.  Flexible working practices. often mean job insecurity, no sick or holiday pay, and long hours.  The unions do their best but their hands are tied.  At shop floor level, the situation is exacerbated by the traditional ‘us and them’ culture of industrial relations.  To most UK managements, the very idea of the employees having a real say is an anathema..  The result is that the unions are often forced into an oppositionist corner..  They are then denounced as Luddites.  Public sector employees can theoretically approach their elected representative on the local council or their MP.  However if you work in the private sector, as most people do, you are powerless.  So how do we redress the democratic deficit?

The ‘Rhineland Model’ of industrial co-partnership where employees are directly elected to a supervisory board has worked well in western Germany.  But it’s only the second tier of governance.  The main board representing the owners only makes the final decisions.  A more radical approach would be for employees to sit on the main board as part-owners of the equity.  This is where Employee Share Ownership Plans come in. With ESOPs the employees own a substantial part of the equity.  This should not be confused with preferential share option schemes for directors or dishing out a few shares instead paying proper wages.  The pamphlet identifies three ways to promote ESOPs. The government should introduce fiscal incentives and reform administrative procedures for dealing with them.  Improved marketing and management training are also important here.  EPOS works.  Firms which have schemes have better performances and higher productivity.  The reforms proposed involve changing very arcane company law and taxation philosophies.  This is heavy stuff but Mr MacShane has the facility to explain these topics in plain English.  This pamphlet is must for anyone interested in industrial democracy.

*’Ownership for the Many not the Few’ by Denis MacShane MP  

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