Page 33 - Chartered ONE – Issue 26
P. 33

The role of government in a developed market economy is to create the conditions in which businesses can be established and be successful. Thankfully, with substantial cross-party support in parliament, successive UK governments since 1978 have embraced employee
share schemes. This in itself is testimony to the unifying nature of employee share schemes as a policy that is known to have no serious opposition and which
in the UK is well-advanced with a set of schemes on the statute book for which significant tax- efficiencies are available.
When communities can unify around economic success that does not discriminate on the basis of race, creed or gender, many of the social problems that have produced rioting
and looting will disappear. Employee share schemes do have the capacity to generate individual personal wealth whilst contributing to social cohesion as all in the company unite around the totem of the developing share value. For Margaret Thatcher, employee share schemes were part of the recipe for quelling the industrial unrest that had plagued British industry in the 1970s while for Gordon Brown the appeal of employee share schemes was its capacity
to redistribute wealth not by
the traditional method of social security but by actually rewarding hard work and endeavour.
The present government
is committed as part of its December 2019 general election manifesto not to return to austerity and, indeed, has restated its commitment to delivering prosperity to the forgotten communities of the north and the south-west. So, what role will employee share schemes play in that programme and what uses will companies make of the tax-advantageous legislation? Surely employee share schemes will provide part of the business prescription for the country’s economic survival and revival.
Employee share schemes do indeed have a role in alleviating the effects of new unemployment and, at the same time, providing incentive for jobs arising from new employment. Alleviating
the consequences of new unemployment comes from
the ability of employee share schemes to introduce a capital share incentive alongside a lower basic wage position that may be necessary to enable the company to survive in these testing times and, at a macro-economic level, to maintain employment levels. Economic history shows that hiring people declines both during and immediately after
a recession, so the need is to reduce the cost of employment. In this situation, the introduction of the employee share scheme will enable a restatement of the remuneration base in the form
of a capital return element that has the longer-term capacity to produce dividends and capital
gains co-existing alongside the traditional wage income element.
The key sister policy to employee share schemes is
cash profit-sharing and bonus schemes which enable the company to embrace variable pay, a crucial element in maintaining employment levels in any economic system. In this current situation where cash preservation will be a business priority, the profit-sharing and bonus awards can be partly or all in shares; and any element paid out in cash through profit-sharing is self-funded anyway out of the profits that have given rise to the profit-sharing in the first place.
The incentive for jobs
arising from new employment opportunities will make returning supply chain companies competitive in the recruitment and subsequent retention of new employees. Blending
into the economic fabric of our nation will be the priority of
the returning companies, and that will require an economic response that understands the social predicament that the nation now finds itself in with the requirement to embark upon
a rebuild that accommodates diversity, avoiding any form of discrimination but, at the same time, maintaining meritocratic responses to promotion and career progression for all employees who prove their worth.
Looking to the immediate future for longer-standing private companies, there may be fewer full management
buyouts as existing owner- managers require time to rebuild value following recent events. However, there may be more partial management buyouts
as existing owner-managers extend the shareholder base to senior employees to generate
a cooperative incentive for that value rebuild.
This year of 2020 to date has seen major threats to the core of our democratic institutions. The Roman civilisation collapsed from within because the people lost their virtue and good intent. For our western form of democracy to survive, opportunity must
exist for all, the chance to
truly live the dream, and that requires available pathways
for anyone to generate wealth through genuine reward for genuine work. Employee share ownership is a unique tool, a powerful ally for both economic success and social cohesion. Remember that “incentive” breeds “inventive” and in these tumultuous times it is economic rebuild, indeed economic rebirth, that is of the essence for our economic prosperity. As a dictum taken from the scared writings going back generations, where there is prosperity there
is peace. Economic success is the path to social cohesion and employee share ownership has
a substantial contribution to make to the realisation of this aspiration.
David Craddock Consultancy Services
    David Craddock Consultancy Services
Specialist in Employee Share Ownership and Reward Management
Management Buyouts, Share Valuation and Investment Education
Please feel free to contact David Craddock who will be very pleased to discuss with you your employee share scheme initiative
Telephone: 01782 519925
Mobile: 07831 572615
E-mail: [email protected]
Please also see the website of David Craddock Consultancy Services as follows:

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