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Is employee ownership a viable option for retailers?

08/02/2013

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United Kingdom

Killing the Internet

This article first First appeared in Retail Week, 8 February 2013.

Retail Week Q&A - employee ownership

Q: Is employee ownership a viable option for retailers?

A: Employee ownership is indeed a viable option.

Employee ownership can take different forms.  It is a flexible concept which can be moulded to suit virtually any size or type of business, and can be implemented at any stage in the development of a business. 

It is certainly a viable option for retailers and John Lewis Partnership plc is proof.  Since 1950 John Lewis has been wholly owned by employee trusts which hold the shares of John Lewis Partnership plc on trust for the benefit of the group's employees (which include Waitrose employees).  The John Lewis employee ownership model is widely acknowledged as a great success story where employees are engaged in the business in which they work and benefit from the profitability of that business. 

The benefits of employee ownership are clear: these were summarised recently in the Nuttall Review of Employee Ownership (the "Nuttall Review") which was commissioned by the Government to identify the barriers to the widespread use of employee ownership and to suggest potential solutions.  One of the clearest benefits of employee ownership is its role in providing a catalyst for greater employee commitment and engagement.

There are two broad categories of employee ownership: indirect ownership through an employee benefit trust and direct share ownership by employees.  It is also possible to combine the two types of employee ownership.  In principle, both models are suitable for retailers and the decision as to which form to adopt will be depend on the specific circumstances of each business and what it seeks to achieve.

The Nuttall Review found that there is a widespread perception that employee ownership is difficult to implement and burdensome.  In order to try to combat this perception, the Department for Business, Innovation and Skills ("BIS") has announced it intends (amongst other things) to establish an implementation group to produce model documents which will help ease the transition for business owners to employee ownership.  BIS hopes that employee-owned companies will soon be as recognisable as any other business model.

Employee ownership in the retail sector is not just about John Lewis.  Members of the representative body for employee owned businesses, the Employee Ownership Association, with retail businesses include Kite Packaging Limited ("The majority of employees are share holders"), School Trends Limited ("The majority of the shares are now held in a Trust Fund for the benefit of the employees as a whole. Individual employees own the remaining shares") and Galloway & MacLeod (one of Scotland's oldest agricultural businesses which moved from family to employee ownership).

Written by Jennifer Martin, an associate in Fieldfisher's Tax and Employee Ownership Team

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