The Employee Ownership Advantage: benefits and consequences

Adverse economic environment is prompting a reappraisal of alternative ownership models to the dominant public and private shareholder models - one that is not only resilient in times of adversity but also promotes sustainable wealth creation and equitable distribution. In the UK, in particular, the case of employee-ownership has recently gained attention - in part because of the recognition of the need for fairer society, but also because adverse economic conditions point to business resilience as an important part of sustaining employment and long-term growth. The UK has a healthy but small employee-owned sector. The sector is estimated to be worth £25 billion annually - equivalent to 2 per cent of UK GDP. It comprises firms that operate in a wide range of sectors, from retail, to manufacturing and engineering, to financial services. Employee-owned organisations can also be found in the public sector, where they deliver services such as health and community care.

Research by Professor Joseph Lampel, Professor Ajay Bhalla and Dr Pushkar Jha established that Employee-Owned Businesses (EOBs) - firms where employees own stake both individually and collectively through a trust- are more resilient, display less sales variability, and deliver more stable performance over business cycles. The report also showed that the profitability of EOBs correlates with giving employees greater autonomy in decision-making. EOBs that adapt their organisational structure and empower their front-end employees are more likely to sustain their performance as their size increases. It also provides evidence that EOBs create jobs faster than their Non-EOB counterparts and particularly so in times of economic downturn.

This study adds to this evidence base by examining the following:

  • Evidence that benefits of employee ownership vary across different business sectors
  • Evidence on whether employee ownership can create a longer-term focus in businesses
  • Evidence of the impact of the distribution and concentration of employee ownership on performance
  • Evidence on whether higher employee ownership increases human capital investment
  • Evidence on institutional disadvantages faced by employee owned businesses.

The full report is now available below, including a foreword by Norman Lamb MP, Minister for Employment Relations, Consumer and Postal Affairs.

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