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Law for Business

Knowhow - guidance - precedents

06 SEP 2012

Employee Ownership - What Does it Mean?

Employee ownership is not a generally well-known concept until now. Nick Clegg, the deputy Prime Minister announced earlier this year his intention to encourage this, ‘John Lewis' business model as a go-to business model in our economy. Kathleen O'Reilly, Jordans' Head of Internal Legal Services attended the unveiling of the Nuttall report on this at the 4 July summit.*

The report sets out recommendations for the government and interested parties to consider to overcome legal and other barriers to the creation and uptake of employee ownership arrangements.

Employee ownership has many benefits including greater employee engagement. As such businesses are often structured so that they cannot be sold off easily, this can encourage:

  • A greater sense of responsibility;
  • Longer term focus for managers; and
  • Sustainability

Not least of the resulting benefits would be the advantages for the UK of an even more diverse and complex economy, one less reliant on the PLC business model.

Three key recommendations were highlighted from the summit:

  • Consultation on the introduction of a statutory right for employees to request consideration of some form of ownership in the company they work for;
  • The establishment of an Institute to bring together businesses, experts, legal and financial advisers and academics interested in this area, to develop this sector further; and
  • Development of business models, toolkits etc.

‘Toolkits and models will make it easier to adopt this business model although it is accepted that one size couldn't fit all. Steps like this would encourage advisers to ensure that employee ownership is another option on the table for clients. We'll be talking about employee buy-outs as well as management buy-outs, "stake-overs" and not just takeovers,' says Kathleen.

BIS will be consulting on the employee right to request and other matters in the very near future. For more information on employee ownership please see: http://www.bis.gov.uk/assets/biscore/business-law/docs/s/12-933-sharing-success-nuttall-review-employee-ownership.pdf

*Graeme Nuttall of Field Fisher Waterhouse is the government's independent legal adviser on employee ownership.

Kathleen O'Reilly

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