New report examing the case for expanding the EO business sector

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For immediate release

EMBARGOED until 00:01 Monday 16th January

16th January 2012

In a new paper for the Employee Ownership Association, William Davies (Academic Director at the Centre for Mutual and Employee-Owned Business, Oxford) urged the government to consider new policies to facilitate the growth of the £30 billion employee-owned sector. Entitled ‘All of Our Business, Why Britain needs more private sector employee ownership' the paper argues that the model delivers improved employee wellbeing and points to evidence that employee-owned companies* outperformed their rivals during the recession.

The starting point for the report is that the culture of ‘profit maximisation’ constitutes a threat to UK business. Sponsoring the report, the view of Childbase Nurseries was that culture of seeking short-term profit at any cost has been destructive for organisations in a number of sectors and needed to be challenged.

Mike Thompson (OBE) Chief Executive of Childbase, summarises: “This report highlights what employee-owned companies have long believed. It is the enduring and dependable relationships with colleagues that are a company’s most valuable resource. With this focus comes the operating standards to which we aspire, and the financial returns to be shared with those who generate the success.”

The report cites John Lewis Partnership as an exemplar of a successful employee owned company, characterised by a ‘profit making’, but not a ‘profit maximising’ approach to business.

Patrick Lewis, of the John Lewis Partnership added, “The employee owned model guarantees that we employ Partners who are motivated, committed and passionate about the brand. This is the anchor for much of our success.”

Gripple Inc is another example of a flourishing employee owned company, with a founder determined to ensure that the model would be a permanent feature. From 2007 onwards, all Gripple employees have been obliged to purchase a minimum amount of shares in the company.

Gripple Founder, Hugh Facey said, “The employee ownership model helps to define this company and I want to ensure that we never lose sight of our founding principles. I would not run this company any other way”

The report concludes by calling on the government to intervene to drive future growth in the sector. Davies notes that Employee Benefit Trusts lost their tax advantage in 2003 and calls for this to be restored. He also supports the extension of the Enterprise Investment Scheme (EIS) to employees. Currently, the EIS benefits external shareholders, and excludes employee shareholders.

Finally, Davies argues that the new enthusiasm for credit easing needs to be extended to employee-owned companies.

William Davies (author of ‘All of Our Business, Why Britain needs more private sector employee ownership'): “The credit squeeze has hit the sector hard. It is essential that employee owned companies are able to borrow money from banks who are sympathetic to their needs, rather than equity investors who seek rapid entry and exit. I hope an extension of credit easing would be the first step in helping to boost a sector that can play a vital role in shaping a more balanced, egalitarian and prosperous economy”.

Ends

*William Davies’ definition of employee-owned companies: “businesses in which the majority of the shares are owned directly by employees, or owned on behalf of all employees in some sort of special purpose legal entitity, such as an Employee Benefit Trust (EBT)”