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Employee ownership stalling 15 January 2015

Posted by cooperatoby in cooperative, EU, Social enterprise.
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EO in Europe 2007-14Employee share ownership is almost the other side of the coin from the investor-led type of ‘social business’, in that it addresses the third dimension of social enterprise – participation – rather than a company’s objective (social or not) or profit distribution policy.

It is based primarily on an individualist model and is conceived of as giving individual workers an incentive to work harder, by sharing the returns with them through the payment of dividends, thus increasing returns for investors too. But it can have a collective dimension, as in the case of ESOPs, where worker shareholdings are held and voted by an employee trust. It is also generally held to improve the efficiency of work organisation. There is some overlap with the social economy in the case of Spain’s 11,500 sociedades laborales, in which pubic authorities can invest for local economic development purposes.

Employee ownership has progressive intents in that it shares the fruits of labour more equitably, and also deters hostile takeovers (though it does not prevent corporate takeover as in the case of Britain’s bus companies). Many governments have therefore enacted measures to encourage it, and until 2011 it has been steadily growing. The European Federation of Employee Ownership (EFES) annual survey reports that in 2013 8.75 million employees 31 European countries held fractionally under 3% of company capital, worth in total €267 billion (an average holding of €30,000). However its latest annual survey finds that although in 2014 this total rose to €310 billion, the number of employee shareholders has now stopped:

For the third consecutive year in 2014, the number of employee shareholders decreased in Europe. This should be a warning signal for everyone. In fact, the number of employee shareholders in continental Europe decreased by 500.000 persons (-8%) from 2007 to 2014, while the number increased by 200.000 persons in the UK (+8%). These changes are clearly related to the regressive fiscal policies in many European countries, while in contrast, the UK chose to double the fiscal incentives for employee share ownership, considering it is a key element of recovery and an investment for the future.

Employee ownership is one the tools we need to transform the economy, so the reversal of this growth trend is worrying as well as surprising.

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