The Employee Ownership Update
June 15, 2015
Levels of Employee Ownership Declining in GermanyThe German Share Institute (Deutsches Aktieninstitut) issued a call for policy makers to increase the amount of employee ownership in Germany. Christine Bortenlšnger, the CEO of the Institute, noted that "the number of employee shareholders is declining in Germany. In fact, it has never been so small." The institute reports that the current number of employee-owners in Germany is 800,000, down from 1.6 million in 2000 and far fewer than the 3.3 million employee-owners in France and 2.2 million in Great Britain.
Do ESPPs Bolster Retirement Security?In ESPPs Can Help Insulate Retirement Savings, Sara Kelly of Plan Sponsor magazine argues that, although employee stock purchase plans (ESPPs) are not retirement plans, they can help protect employees' retirement savings. Dave Gray at Charles Schwab notes that although equity compensation and retirement plans are often in separate organizational silos, their messaging and planning should reflect the current trend toward integration. Emily Cervino of Fidelity agrees that ESPPs are by no means retirement plans, but that they can still be "an effective way that companies can help their employees insulate their retirement savings." A study by Fidelity found that employee behavior often supports that insulation: 57% of ESPP participants in the survey plan to use their ESPP assets for retirement or later investment rather than current expenses.
Clinton Launches Campaign With Theme of an "Inclusive Economy"On June 13, Hilary Clinton formally launched her campaign for president with a promise "to build an inclusive economy." Among the examples of the policies that might be included in such a platform, she said, "I will give new incentives to companies that give their employees a fair share of the profits their hard work earns."
Employee Ownership at HuaweiThe June 11 article Huawei's Culture is the Key to Its Success in the Harvard Business Review traces much of the telecommunication firm Huawei's culture to its employee ownership. Huawei, based in mainland China, had revenues of $46 billion in 2014 and, unlike any other Chinese firm on the Fortune Global 500 list, a majority of that revenue comes from outside China. The company founder, Ren Zhengfei, now owns 1.4% of the company, and over 82,000 employees own the rest through performance awards.
The authors, David De Cremer and Tian Tao, argue that four factors created Huawei's growth: its customer focus, employee dedication, long-term thinking, and gradual decision-making. The ownership awards create what the company calls "silver handcuffs," increasing employee retention and recruitment, and encouraging long work hours. In its early years, the company issued a blanket and pillow to each new employee. Huawei is run by a series of CEOs who rotate through the job for six months each, a process designed to slow down decision-making in order to ensure careful consideration. The company says that an IPO is incompatible with its dedication to long-term planning.