Five key tips for share schemes in employee ownership

CDS Employee Owner Managers Event 21The fourth in the series of Expert Breakfast Briefings took place earlier this week in Edinburgh. The topic was Employee Share Ownership and one of Scotland’s leading experts, Rodger Cairns of Shepherd & Wedderburn led the session for business advisers and owners.

Here, Carole Leslie, a specialist adviser with CDS, discusses the session’s  recommendations.

Share ownership is a critical element in employee ownership. In too many firms, shares are seen as just another perk contained within a remuneration package, which benefit only a few.

In employee-owned companies, shares represent that tangible ownership stake which reinforces the link between individual performance, corporate results and shared reward.

The key to success is viewing the share scheme as part of the overall corporate plan. Rodger highlighted five tips to consider when implementing a share scheme.

1.     Identify and clearly articulate the link to strategy

Be clear about why the scheme is being introduced and explain why it is important to the business

2.     Give yourself plenty of time

Don’t underestimate how long the process will take – careful planning at the outset with all relevant stakeholders makes for a much more effective scheme  

3.     Make sure senior management actually participate in all employee schemes

If the senior team don’t value the benefit, why would anyone else

4.     Communicate, communicate, communicate

Involve people in the design process, explain the scheme at the launch, and reinforce the benefits on a regular basis throughout the life of the scheme  

5.     Keep it simple

If participants don’t understand it, they won’t value the share scheme.  Balance the tax advantages with the ease of implementation and understanding.  Tax breaks should not be the only motivator.

Harper Macleod's Chris Kerr

Chris Kerr of Harper Macleod

The final session in this series of briefings will look at governance in employee owned firms and will be led by Chris Kerr and Craig McKerracher of Harper MacLeod, both of whom have worked with a number of employee buy-outs.

Chris and Craig will be supported by Nick Kuenssberg, chairman at Scott & Fyfe, the Tayport employee-owned firm that had seen several generations of family ownership. Nick will give a pragmatic perspective on how governance works within the business.

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