Catherine Gannon is the managing partner of Gannons.
Statistics show that the companies which introduce share schemes outperform companies that do not. That is growth right there. 99.3% of the British economy is driven by small private companies that need all the support they can get to succeed and thrive. Employee ownership helps to achieve their success. Employee share ownership promotes a culture of employee commitment, loyalty and sharing which is something the British public seems to have forgotten over the past decade and which is needed to make it great again.
There are several ways to widen and deepen the adoption and use of employee share ownership. The major driving force will be the government. The government needs to take one large step which is to work with HMRC to simplify the legislation relating to shares provided to employees. So far, there has been hot air but no action. In fact the reverse, each year seems to bring even more complicated rules. Issues become unnecessarily complicated very quickly over amounts of tax which may be relatively small given the start-up nature of many companies awarding shares. A secondary driving force is to continue to beat the drum about why aligning employees with owners can work. Other forces are at work such as the willingness of employers to invest in good employee communications. Bodies such as the Esop Centre have a role to play through their members.
Much depends upon the type of business and the view of shareholders. Applicable to any business is test the water and start small. Most share plans are flexible and can be tailored to suit the needs of both different businesses and different employees. The commercial desires of the business should sit before tax considerations.
Trying to forecast trends in employee share ownership can be tricky given that the government likes to introduce surprising changes to the legislation at eleventh hour but let’s try to do this. The legacy of the dot com boom when many employees felt duped when they realised that their equity package was over inflated in terms of wealth is still present with older employees. We haven’t heard about “under water” options quite so much recently but it is still a risk. If the economy remains stable or grows, if expectations are managed appropriately, as the legacy of the dot com disaster stories fade we may see a new breed of more entrepreneurial employee more prepared to genuinely invest in the business in terms of time and commitment. Ultimately, employees want to see cash in their pockets so the market for the shares has to be seriously considered.
If HMRC introduce legislation which effectively outlaws the use of consultants, we may see an increase in share plans designed for former consultants who are now on the payroll due to changes in the PAYE legislation.
I expect that the use of Employee Shareholder Shares will go down as a result of the introduction of the £100k cap on tax free gains on the sale of the shares.
I also expect Investors’ Relief to get more traction when it becomes available to claim around 2019 which will decrease the use of unapproved options which used to be used for consultants and non-executive directors.
Unfortunately, I cannot see the need for austerity lifting and doubt there will be surplus cash available for wage inflation. This means employers will need to continue to search for inventive uses of share schemes.
Abolishing Profit Related Pay schemes (which I loved) with the introduction of Enterprise Management Incentives (EMI) in 2000. It revolutionised the way start-ups offer equity to starter staff and gave a real boost to the SME economy. The successful HMRC clamp down on artificial uses of employee benefit trusts and other creative means of rewarding employees has been instrumental in the appetite for employers to engage in tax planning. At PLC level the insurgence of shareholder revolt at pay deals which are perceived as excessive or rewards for failure is making an impact.
Simplification of the employment related securities regime and disguised remuneration rules. They are a minefield.
Because it promotes economic growth and I think politicians see that. All politicians want the Exchequer to benefit through increased profits on which there is an increased tax take. The current government has made it clear it wants to clamp down on low taxes made on property. There is a push towards encouraging locking investment in the company until a capital event such as sale or listing and employee share schemes promote working towards that goal.
Personally, I value Esop Centre conferences and newsletters as they keep me up to date and get an overview of where the industry is going.
Share schemes need to reach small and medium private companies in the regions as they are invaluable contributors to GNP and I think more could be done to reach them.
I can see myself being happy driving in a red Porsche on a French Riviera. But honesty, on a day to day level it makes me happy to look back at my life and see how far I have come and the law firm I have built up. I tend not to look back and live in the present but it makes me happy to think about the future possibilities. Knowing anything is possible and that your greatest success is round the corner motivates me.
My family. Money comes and goes, businesses can develop and then nose dive, but family is forever.
Alan Sugar. Highlights the mumbo jumbo of corporate life for what it is. Uncompromising, agile and very seasoned.
Entrepreneurs. They are the drivers of progress. Developing new concepts, pitching for investment in the times when bank loans are hard to come by, managing employees, bringing products into the market and not knowing whether there will be enough profit to pay yourself next month’s salary. Yet we all depend on them.