Employee share programmes critical to growth

Citation

(2000), "Employee share programmes critical to growth", European Business Review, Vol. 12 No. 1. https://doi.org/10.1108/ebr.2000.05412aab.007

Employee share programmes critical to growth

Keywords Employee share ownership, Europe, USA, Asia, Economic growth, Entrepreneurship

Research highlights link between Europe's fastest growing businesses in comparison with USA and Asia

One of Europe's leading business associations has found that employee share ownership and stock option programmes are a critical factor in accelerating company growth.

Growth Plus, which identifies Europe's 500 fastest growing companies each year, has found that more than half of these companies have an Employee Share Ownership Programme (ESOP) and that half of the other companies plan to introduce such programmes in the near future. Robin Lokerman, executive director said: "Our 1999 Research Report has highlighted that Europe's most dynamic entrepreneurs regard human capital as a major driver of both competitiveness and shareholder value."

The report found that high-growth companies introduce ESOPs to attract and retain high-quality employees, encourage loyalty, develop an entrepreneurial spirit, protect cash flows and signal to investors with reference to protection of assets invested in human capital. Examples of these non-performance related schemes which cover all employees include share option programmes, direct share purchase, save-as-you-earn, and share warrants.

Since 1970, unemployment in the European Union has increased fourfold and is now more than double the level in the USA. During this period, 30 million new jobs have been created in the USA compared with less than 5 million in Europe. One-in-five of all mid-sized companies in the USA is fast growing; only one-in-25 in Europe is regarded the same.

Lokerman added: "When compared to countries such as the USA and Japan, Europe currently has a poor track record regarding unemployment, productivity and job opportunities. We simply do not have enough fast growing companies." He continued; "Growth Plus aims to create a more entrepreneurial culture across the continent both within companies themselves and the environments in which they operate. By researching the characteristics of our 500 fastest growing companies, we can communicate these findings and hopefully reach our goals".

Growth Plus believes there are a variety of benefits for Companies that use ESOPs and for the employees who receive them. In many cases for example, no cash investment is needed, the schemes can be tailored to ensure that the incentives offered to the employee and the rewards earned by the company are based on the same yardsticks. Finally remuneration packages can be developed to encourage employees to stay with the company for a minimum length of time.

The main benefits for employees are that the schemes provide opportunities for wealth creation and they share directly in the financial improvement of the company.

For further information, or a copy of the five page Executive Summary of the 1999 Research Report please contact: Roger Haywood, Kestrel Communications. Tel: 0181 543 2299; E-mail: roger.haywood@kestrelcomms.co.uk