Member Article

Sharing success: the Nuttall Review

Andrew Leck, head of ACCA UK, shares his views on the recent Nuttall Review, that explored employee ownership.

In July 2012 the Nuttall review published its in-depth report on employee ownership titled “Sharing Success”.

Employee share ownership means exactly what it says on the tin, a ‘significant and meaningful’ stake in a business by employees. The definition of ‘meaningful’ includes:

• direct employee ownership, through share plans where share employees become individual owners in their company;
• indirect employee ownership, shares held collectively on behalf of employees normally by employee benefit trusts;
• and a combination of direct and indirect ownership.

So what does that mean for business and is it a good thing?

The underlying concept of employee ownership is to create successful businesses that employees have a stake in. The more successful the business the greater the desire to work there, and the upward cycle continues.

Others benefits were highlighted by the review of businesses operating employee ownership schemes showed they:

• created jobs faster;
• were more resilient during an economic downturn;
• were generally more profitable;
• improved business performance;
• had greater employee commitment and engagement;
• helped with succession planning; and
• helped drive innovation.

A key benefit highlighted within the review was succession planning. This has been commented on by the ACCA as a key stage in the business’ life cycle where employee ownership can provide a valid solution allowing a business to continue, flourish and retain its market position.

When promoting economic growth the Deputy Prime Minister has stated that he wants employee ownership to fall “into the bloodstream of the British economy”. The government’s plan is to encourage more ‘John Lewis’ style companies.

So if employee ownership is great why isn’t every business doing it, three main barriers were identified? Firstly there is a lack of understanding of what employee ownership means. Secondly there are limited resources available to support the scheme. Thirdly employee ownership schemes often have legal, tax and other regulatory complexities.

How do you overcome these barriers and promote employee ownership? The aim of this government is to raise awareness of the schemes available.

It will also aim to increase the resources available to promote employee ownership and to bring it into the mainstream economy. The review recommended reducing some of the complexities involved. This could be taken as far as producing ‘off the shelf’ models readily accessible to businesses. Finally the review makes the point of making sure the proposal and work done to remove barriers actually happens, calling upon the government to ‘ensure implementation’.

Part of the ‘off the shelf’ model would be to produce ‘toolkits’ covering areas like:

• Setting up an employee benefit trust and trustee company
• Giving shares to an employee benefit trust
• Making cash contributions to an employee benefit trust
• The trustee of an employee benefit trust subscribing for shares
• The contribution for an employee owned company and guidance on entrenching share rights
• Guidance and best practice on achieving employee engagement

As with all barriers there will be always be certain complications, this is where the help of a trusted advisor is vital, get it right and get it right in one go. For details of your local business advisor please visit the ACCA’s ‘Find an Accountant’ resource here. The full Nuttall review can be found here.

This was posted in Bdaily's Members' News section by Ray Allger .