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Employee Ownership – the Government Response

Remember Nick Clegg’s vision of a ‘John Lewis economy’ in his Mansion House speech back in January this year? That prompted the appointment of Graeme Nuttall to carry out a review of the potential for transitions within private companies towards employee ownership. Last week the Department for Business, Innovation & Skills (BIS) issued its response to the Nuttall review. The response is divided into three ‘themes’ which the government says will make up the key elements of its approach to promoting employee ownership in the private sector.

Raising awareness of employee ownership

The government will set up a Minister-led implementation group with the aim of developing a programme to raise awareness of employee ownership. It also has plans to work with organisations including The John Lewis Partnership, the Employee Share Ownership Centre and HMRC to develop guidance and promote the concept.

Murmurs of concern were voiced in response to Nick Clegg’s vision of “an automatic opportunity for every employee to seek to enter into a share scheme”. Perhaps unsurprisingly, BIS reports that organisations represented at roundtable discussions over the summer didn’t favour a statutory ‘right to request’ employee ownership. To avoid increased regulatory burden, BIS will work with ACAS to develop a voluntary guide to support employers and employees who wish to request or discuss employee ownership.

Increasing the resources available to support employee ownership

Work is underway to establish an institute for employee ownership, brought together by the Employee Ownership Association (EOA). By the end of 2012, the EOA will deliver an independent commercial analysis to determine the financial viability of the institute, together with a business plan if appropriate. The implementation group will assess demand for the institute and will also work to develop “off the shelf” templates for employee ownership including model articles, employee trusts and technical advice on tax.

Reducing the complexity of employee ownership

The government has issued a consultation on proposals to simplify the relevant company law provisions on buy-back of shares. The implementation group will also establish a group of professional bodies to produce pro-forma “off the shelf” template documents to assist businesses.

Comment

How do private sector employers feel about the idea of employee ownership? Staff benefiting from investment in their own employers sounds like a great idea but what would happen if they have to watch their savings evaporate with the company’s share price?

More details on these initiatives are expected in the Autumn Statement and it’s envisaged that the outcome of a Treasury review of the role of employee ownership in supporting economic growth will also be available by then.

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