Employee Equity Plans: Do They Have a Future?
19 November 2009
Employee Share Plans are widespread - many organisation utilise them and coverage extends from the shop-floor to the Boardroom, as well as beyond their US and UK origins.
Given important factors including volatility in the equity markets, changes in accounting charges and growing cost constraints, it is important to critically consider whether employee share plans are effective. Do they motivate employees and efficiently reward their contribution? Have they been successful in unifying the interests of employees with investors? What are the trends and how uniform is the application of these schemes, in terms of global organisations?
In 2009, PARC collaborated with Hewitt New Bridge Street and WorldatWork to conduct a major research initiative into the topic of Employee Share Plans.
The Research Report Meeting:
The results of this research have been captured in a joint research report, which formed the basis of this meeting. The research addressed a wide range of issues relating to the effectiveness and future of employee share plans, including the following:
What is the current state of play regarding design, availability and take-up of employee share plans on a national and international basis? What innovative practices have emerged in this area? Why do companies have these schemes? Tax relief? Retention? Part of the 'employee wealth' package? To make employees 'owners' of the business and share in corporate success (and failure)? Are companies looking to reduce or extend these schemes? If so, why? Do they work? Are they are cost-effective form of reward? Are they 'valued' by employees? How do we measure their effectiveness? As a form of reward payment or retention tool? As an integrated source of personal savings and financial planning? Have international companies extended their plans to all employees? If so, why? If not, why not? What are the implications of applying plans globally into differing jurisdictions/cultures (particularly as US and European economies struggle, but India, China, Gulf State and South American markets flourish? Does the volatility in global equity markets present problems for these plans? What are the dangers, opportunities or appropriateness in a recession? Have the UK/US accounting charge regulations changed attitudes to share plans? Does this herald a reduction in their use? Will market volatility have a greater impact? Given the regulatory, economic and cultural issues, what are the key considerations in communicating share plans? How are these plans integrated into total reward? What does the general future direction for share-based reward appear to be? Will they provide an efficient use of capital and optimal return on investment? Can they continue to be seen as a tool to enhance performance whilst creating employee involvement as well as connectivity between performance and personal returns? Will there be new trends in the design of these schemes in response to changing economic and employment environments?
The meeting included a combined presentation team from PARC, Hewitt New Bridge Street and WorldatWork.