Many companies have been diminished by COVID-19 and post pandemic employees may face job insecurity and lower incomes. If in a more streamlined way companies could incentivise chosen employees through share ownership it should assist business recovery.
Well designed employee share ownership (‚’ESP‚’) improves corporate performance whilst increasing work satisfaction, well being and loyalty.
Studies confirm that companies with ESP tend to be more successful than those that eschew the opportunity.
A SIMPLE HYPOTHETICAL EXAMPLE OF THE POSSIBLE FINANCIAL BENEFIT OF ESP
1. Envisage a trading company with a current value of ¬£1m that is owned by five equal shareholders.
2. 20% ESP by way of new shares is introduced.
3. Assume the company has an annual growth in value of 10% increasing to 15% with ESP.
4. After eight years the company would have a value of ¬£2.14m increasing to ¬£3.06m with ESP.
5. If the company is then sold the five original shareholders receive:
– 20% of ¬£2.14m = ¬£0.43m without ESP; or
– one sixth of ¬£3.06m = ¬£0.51m with ESP; and
– between them the ESP employees also receive ¬£0.51m.
6. Everyone gains from the division of the larger corporate cake created by ESP.