Why Employee Share Ownership Matters

Employees Share Ownership (ESO) contributes to the economy, to social mobility, to levelling up, and to localism, and these issues, rather than simply taxation, should also be front and centre in decision-makers’ minds when considering ESO. ESO began as a USA and UK movement in the 1970s. ESO has spread widely internationally. This short paper is a recap of the broad case for ESO in 2022.

Employee Stock Ownership Plan (ESOP) schemes align well with the UN’s Sustainable Development Goals (SDGs), especially SDG 10 – Reduced Inequalities. Although ESOPs are not a panacea, they can help to deliver significant marginal gains across most SDGs (see figure 5), particularly in the development of sustainable, resilient communities. Four areas of public policy can contribute to support the formation and health of ESOPs – education, legislation, taxation, and research (particularly around benchmarking and statistics):

  • education - in addition to informing employers and employees about the benefits of ESOP schemes, policymakers should ensure that participants are aware of the associated risks, particularly if employees will be relying on accumulated ESOP shares for their retirement;
  • legislation - ensuring that issues. such as listing requirements and voting rights, do not impede the establishment of ESOPs;
  • taxation – this paper emphasises that tax advantages are not fundamental to the establishment of ESOPs, however, tax benefits can help start-ups and SMEs who are seeking to enhance the recruitment and retention of key staff whilst keeping near-term equity-raising and costs under control. Tax benefits can help established firms and their employees within a framework of wider community benefit.
  • research - benchmarking and statistics are important tools for policy makers seeking to formulate a regulatory and fiscal environment that encourages the formation of ESOPs. A great deal of existing literature exists examines the human resource effects and economic performance of ESOP companies around the world. However, research into the communitarian aspects of ESOPs as well as their impact on the UN SDGs, is less developed.
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