Employee ownership index companies continue to out-perform over the long term
Companies in the UK Employee Ownership Index (EOI) outperformed the FTSE All-Share in the first nine months of 2012. Employee owned companies' share prices were up 5.4% compared with the FTSE All-Share companies' share prices which went up by 4.9%.
The EOI, published by law firm Fieldfisher, slightly under-performed the FTSE All-share in Q3 of 2012; EOI shares were up 3.4% whilst the FTSE All-share rose 3.7%. However, over the long term, companies in the EOI outperform FTSE All-Share companies by an average of 10% each year since the EOI began.
The EOI is published by the Equity Incentives team at law firm, Field Fisher Waterhouse LLP. It monitors the share price performance of listed companies, comparing the performance of FTSE All-Share companies with companies that are over 10% owned by employees.
An investment of £100 in the EOI when the index began in January 1992 would at the end of September 2012 have been worth £661 whilst the same investment in the FTSE All-Share Index would only be worth £244.
Graeme Nuttall, head of the Equity Incentives team at law firm Fieldfisher, and as the Government's Independent Adviser on Employee Ownership author of "Sharing Success: The Nuttall Review of Employee Ownership, says:
"The Employee Ownership Index continues to play an important role in demonstrating the benefits of employee ownership. The share prices of companies in the Index are higher over the long term than FTSE All-Share companies. The Index should encourage more listed, as well as private, companies to look at employee ownership as a means of achieving growth."
Please note that there are two changes to the EOI in this quarter which have retrospective effect and which improve the EOI's performance to date. One company has been excluded from the EOI due to uncertainty as to whether its employee benefit trust is for the benefit of its employees or the employees of a connected company. Another company was found to meet with the qualifying conditions for the EOI and consequently it was retrospectively added to the Index.