Overview The opportunity to participate in the ownership of the company and share in its success is a popular differentiator to attract, retain and incentivise employees. This is particularly the case with smaller ambitious companies who use equity participation in recognition of the fact that they may not be able to compete on salary levels but need to recruit key talent to grow the business. Although privately owned businesses do not have the benefit of a listed share exchange to buy and sell shares, an employee share plan can be an effective way to motivate key employees to increase the long term value of a business, whether the strategy is: ► ► To seek an exit in the future via a sale or listing ► ► To generate long term stability for a family business for the next generation ► ► To align key management team with shareholders to incentivise and share in growth of the business towards key commercial objectives Equity arrangements are more flexible than most companies realise and recent changes have led to improved tax treatment for employees and potential savings for the company. Why offer shares rather than cash? Ownership of company shares can be used to attract and retain key employees, ensuring that they align themselves with the business strategy to increase shareholder value. Delivering the reward via shares can be very cost efficient. It maximises the net return for the employee and reduces direct employer costs and indirect recruitment costs caused by attrition. In 2015, a London School of Economics and National Institute of Economic and Social Research (NIESR) study, provided strong evidence of the positive effects of employee share ownership for employee and employers.
Making Equity Work Sharing Success
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