New index sees Esop companies up 50 percent in 2013

FTSE companies whose employees owned three percent or more of the stock substantially outperformed the market in 2013, according to a new index launched today with the endorsement of the Esop Centre.

According to the FTSE calculated UK Employee Share Ownership Index, the total return of shareholders in esop companies rose by 53 percent last year, compared with 21 percent for FTSE All-Share. At the end of the year the new Esop Index stood at 714.9 (2002=100).

Esop shares have now risen faster than the FTSE All-Share in eight of the eleven years for which the index has been calculated.

End of year: Esop Index (TSR) Esop Index % increase FTSE All-Share % increase
2002 100.0
2003 171.9 71.9 20.7
2004 213.1 24.0 12.8
2005 318.0 49.3 21.8
2006 434.4 36.6 16.8
2007 382.3 -12.0 5.3
2008 212.9 -44.3 -29.8
2009 325.9 53.1 29.9
2010 380.6 16.8 14.3
2011 366.0 -3.8 -3.3
2012 466.4 27.4 12.2
2013 714.9 53.3 20.9

 

The new index was created by collaboration between the London Stock Exchange and Capital Strategies, following a promise last year by LSE ceo Xavier Rolet who said it would  “highlight some of the key benefits of encouraging employees to take an active interest in the future success of the companies in which they work”.  Capital Strategies was able to use FTSE technologies to track total shareholder return and compare it with the return of FTSE All-Share calculated on a similar basis.

Thanks largely to four government supported share schemes open to all employees (two of which are to be radically enhanced in April following the Autumn Statement) between two and three million employees of UK companies own shares in the companies they work for. The esop index includes some 69 FTSE companies where employees own at least three percent of the stock.  Millions of employees will now be able to track sector performance as well as that of their own company.

Launching the new index, with LSE and Capital Strategies at JP Morgan, ESOP Centre chairman, Malcolm Hurlston CBE said: “This is a landmark for employee share ownership. For the first time we have an index calculated to FTSE standards which tracks how companies with substantial and realistic employee ownership perform. It puts beyond doubt the value, to companies and the national economy, of encouraging employees to be shareholders.

The index had been calculated from 2003 and demonstrates that esop companies have substantially outperformed the market through boom and bust in eight out of eleven years. It promises to be live proof that employee ownership not only works but works well.

The Centre will publish it quarterly.”

Nigel Mason of Capital Strategies said: “Screening for employee ownership creates a portfolio of businesses built on intellectual capital and earning high returns on tangible assets.  These companies are engaging their employee shareholders to deliver constantly superior returns.” The screen excludes shareholdings of senior directors.

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Notes to editors

  1. The Esop Centre is a non-profit members’ organisation which promotes all employee share ownership.
  2. The UK Employee Ownership Index, which has been published since 1995, tracks the share prices of companies listed on the main market of the London Stock Exchange and on AIM which have more than 3% of their issued share capital held by employees (excluding main board directors). There is also a version of the index with a 10% employee ownership threshold.
  3. Companies for inclusion in the index are identified using public disclosures. No unpublished information is used. This means the index does not necessarily include all companies who are eligible for inclusion.
  4. The index is calculated using standard FTSE methodologies:
    • The index tracks total shareholder returns, including the effect of reinvested dividends.
    • The index is equal weighted to ensure that the performance of big companies does not swamp the performance of small companies as they do in most other published indices.
    • The index is re-weighted every quarter to maintain parity.
    • Changes to the constituents of the index are made quarterly only on official FTSE review dates.
    • The benchmark index is the total return version of the FTSE All-Share excluding investment trusts.
  5. Further information about the UK Employee Ownership Index can be found at employeeownershipindex.co.uk
  6. FTSE is a registered trademark of London Stock Exchange Group plc. All-Share is a registered trademark of FTSE International Limited. UK Employee Ownership Index is a trademark of Capital Strategies Limited

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