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EFES NEWSLETTER - JUNE 2020
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The
three branches of employee share ownership
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We need to be clear
in Europe that employee share ownership is not a single
model - in fact there are three main models of employee
share plans.
1) Employee Share Purchase Plans (ESPPs). In this model,
employees buy shares of the company they work for, usually
at a discounted price. ESPPs are the most effective
plans for large listed companies.
2) Stock Options, which are the most effective plans
for startups.
3) The ESOP model. It is something completely different
from the first two models and it is the most effective
employee share plan for SMEs. In this model, employees
become the collective owner of the company they work
for. For this, they don't have to use their own resources
or savings. The funding usually comes from external
sources, typically banks (as in a leveraged buyout)
or other sources as in the context of the corona crisis.
The first beneficiaries of the ESOPs are thus not employees
but companies. In the USA, this is a significant way
of funding the whole economy. The ESOP model can help
companies to tackle liquidity problems and bankruptcies,
where employees will the ultimate beneficiaries - this
is why it is an "employee" share plan.
Let's have a look at Europe as regards these three different
models.
1) ESPPs are well known in Europe: Several European
countries have been promoting these schemes for a long
time and successfully so. They are mainly intended for
the some 10 000 European listed companies, employing
36 million employees or 25% of employees in European
private companies.
2) Stock options. The European Commission has just decided
to launch a new strategy to encourage employee stock
options for startups. Undoubtedly a significant step
forward. It is focused on the some 18.250 European startups,
employing some tens of thousands employees or 0.1% of
all employees in private companies.
3) ESOPs. This model is essentially aimed at SMEs (and
large non-listed companies). We calculate there are
1.7 million SMEs in Europe employing 54 million persons
or 37% of employees in private companies, - and even
67 million or 46% if we include large non-listed companies.
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today, employee share ownership in European SMEs is virtually
unknown. It has been highly successful for 45 years in
the USA and so the model for it already exists - the ESOP.
European SMEs are missing out badly, and it could be a
major tool to help tackle the crisis. The European Commission
has made good progress on stock options for startups.
We urge to make similar efforts for ESOPs in SMEs. The
numbers involved are many time greater. More
information
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Press
review
We
have a selection of 27 remarkable articles in 10 countries
in May 2020: Austria, Belgium, Denmark, France, Germany, India,
Italy, Netherlands, UK, USA.
Austria: Successful international employee share plan
for Wienerberger.
Belgium: Better Finance supports the EFES proposal
to introduce the ESOP plan for employee share ownership in
European SMEs.
Denmark: Employee share ownership could be the way
to tackle the corona crisis.
France: Many voices calling for employee share ownership
to cope the corona crisis, including Minister of Finance Gérald
Darmanin. New employee share plan for Ubisoft.
Germany: Employee share ownership to help companies
to tackle the corona crisis.
India: Many employers have introduced Employee Stock
Option Plans (ESOPs) to tide over the immediate funds crunch
and to also be fair to employees who may benefit when businesses
return to normalcy in the future.
Italy: Employee share ownership in family businesses.
Netherlands: Employee share ownership to cope the corona
crisis.
UK: British specialist engineering contractor McGee
shifts to an Employee Ownership Trust.
USA: Blasi & Kruse - How the best companies enact
an ownership culture that propels them forward. Six reasons
why it is the right time now for ESOP plans.
The full press review is available
on:
http://www.efesonline.org/PRESS
REVIEW/2020/May.htm
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A
political roadmap for employee ownership in Europe
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